Videx Wire Products (Pty) Ltd v Competition Commission of South Africa (124/CACOct12) [2014] ZACAC 1 (14 March 2014)

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Videx Wire Products (Pty) Ltd v Competition Commission of South Africa (124/CACOct12) [2014] ZACAC 1 (14 March 2014)

THE
COMPETITION APPEAL COURT OF SOUTH AFRICA
CAC
Case No: 124/CACOct12
DATE:
14 MARCH 2014
In
the matter between:
VIDEX
WIRE PRODUCTS (PTY)
LTD
......................................................................
APPELLANT
And
COMPETITION
COMMISSION OF SOUTH
AFRICA
......................................
RESPONDENT
Coram:
DAVIS JP, MOLEMELA AJA & ROGERS AJA
Heard:
13 SEPTEMBER 2013
Delivered:
14 MARCH 2014
JUDGMENT
THE COURT:
Introduction
[1]
On 26 January 2009 the respondent in
this appeal (‘the Commission’) initiated a complaint in
which it alleged that four
firms in the market for the supply of
mining roof bolts participated in a cartel over the period at least
June 2004 to June 2008.
The four firms named in the initiation
document were RSC Ekusasa (Pty) Ltd (‘RSC’) (at all
material times a Murray
& Roberts company), Aveng (Africa) Ltd
t/a Duraset (‘Duraset’), Dwidag-Systems International
(Pty) Ltd (‘DSI’)
and the appellant Videx Wire Products
(Pty) Ltd (‘Videx’). By the time the complaint was
initiated, corporate leniency
had been granted to RSC.
[2]
On 30 September 2010 the Commission
referred the complaint to the Tribunal, citing the four firms as
respondents. RSC was the first
respondent. By then Duraset, which was
cited as the second respondent, had reached a settlement with the
Commission and the settlement
had been made an award of the Tribunal.
In terms of that settlement Duraset agreed to pay an administrative
penalty of R12,9 million,
being 5% of its total annual turnover for
its 2008 financial year. DSI and Videx were the third and fourth
respondents. In its
referral affidavit the Commission alleged that
the cartel involved [a] the allocation of customers and
maintaining of market
shares and [b] collusive tendering in a
number of specified instances in the period 2004 to 2006. (DSI
claimed that in some
instances the relevant firm which participated
in interactions with the other firms was not itself but an associated
BEE company,
DSI-Mandirk Strate Support (Pty) Ltd. For purposes of
the present appeal it is unnecessary to make any distinction.)
[3]
The Tribunal heard evidence over
several weeks in October 2011 and January 2012. Witness statements
were filed in advance of the
hearing. The witnesses for the
Commission were executives or former executives of RSC and Duraset.
These witnesses, in the order
they testified, were: [a] Mr Allen
Koszewski: He was previously employed as the general manager of RSC.
By the time he testified,
the business in which he was employed had
been sold by the controlling shareholder, Murray & Roberts, to
the Barnes group.
Koszewski then became the general manager of BRC
Mesh. [b] Mr Neville Henderson: Over the period 2002 to 2008 he
worked for
RSC, most recently as its sales and marketing manager. He
left RSC in August 2008 and joined Duraset. He retired from Duraset
in
February 2010. [c]  Mr Hannes Bornman: He was employed
by Duraset over the period 2000 to 2009 and was its marketing
director as from 2003. He was no longer employed by Duraset or any of
the firms by the time he gave evidence. [d] Mr Martin
Cawood:
From October 2003 to mid-2007 he worked for RSC, being promoted to
the position of regional sales manager and then sales
manager,
responsible for the sale of components used in hard rock mining. Like
Koszewski, his employment was transferred to the
BRC Mesh in 2007. He
rejoined RSC for a brief period in September 2010. By the time he
testified he was employed by an unrelated
entity, New Concept Mining.
[4]
DSI called two witnesses, Nigel
Henson and Lukas van der Merwe. Henson was DSI’s managing
director. Van der Merwe had previously
worked for RSC (until November
2010) but by the time he testified was an employee of DSI. Videx
called, as its only witness, Mr
Leon le Roux who was its
manufacturing director and had been employed by Videx since August
1997.
[5]
The various witnesses confirmed their
witness statements (subject to certain corrections noted at the
beginning of their evidence),
were led on certain aspects and
cross-examined at the discretion of opposing counsel.
[6]
In argument before the Tribunal the
Commission’s counsel submitted that there had been an
overarching cartel agreement during
the period 2004 to 2007 and that
certain specific instances of collusive tendering were merely the
implementation of this overarching
agreement (the Commission’s
counsel in their submissions to us used the expression ‘single
conspiracy’ but we
shall refer to it as the alleged overarching
agreement). The specific instances which received attention in the
referral affidavit,
witness statements and oral evidence were; [a] a
reverse auction conducted via the internet in June 2004 by a large
platinum
mining customer, Amplats; [b] a reverse auction
conducted via the internet in October 2004 by a large gold mining
customer,
Goldfields; [c] a second reverse auction conducted via
the internet by Amplats in May 2005; [d] a tender issued by
Xstrata
in mid-2005; [e] a tender issued by a large gold mining
customer, Harmony, in October 2005; [f] a tender issued by a
large
coal mining customer, Anglo Coal, in the first half of 2006.
[7]
The question whether there was an
overarching agreement was important because DSI and Videx, who
claimed that these incidents were
isolated
ad
hoc
acts of
collusion, contended that the complaints in respect of the collusion
concerning Amplats (in 2004 and 2005), Goldfields and
Harmony were
time-barred by s 67(1) of the Competition Act 89 of 1998 (‘the
Act’). That section provides that
‘a complaint in respect
of a prohibited practice may not be initiated more than three years
after the practice has ceased’.
The initiation, as already
mentioned, occurred on 26 January 2009, meaning that a prohibited
practice which had ‘ceased’
prior to 26 January 2006
(‘the cut-off date’) could not validly be the subject of
the complaint. Videx denied its involvement
in the Xstrata collusion
(which, viewing that incident in isolation, was correct). In regard
to the Anglo Coal incident, which
was also said to be an
ad
hoc
occurrence, DSI
and Videx contended that the incident as alleged in the referral
affidavit implicated only RSC and Duraset; that
the Commission was
not entitled at the end of the hearing to seek a finding against DSI
and Videx in respect of that incident based
on the oral evidence
(which indeed implicated Videx and DSI); and that in any event the
evidence did not show that they were parties
to any agreement reached
at the relevant meeting, even if their representatives were present.
[8]
In response to the position adopted
by DSI and Videx in relation to the Anglo Coal incident, the
Commission applied, after the completion
of argument, for an
amendment of the referral. This was opposed by DSI and Videx. No oral
argument concerning the amendment application
was heard.
[9]
The Tribunal delivered its decision
and reasons on 19 September 2012. The Tribunal held that no
overarching agreement had been established.
It found that the
complaints in respect of the 2004 Amplats auction, the Goldfields
auction, the Xstrata tender and the Harmony
tender (which were not
contested by DSI and Videx on their merits) were time-barred. The
Tribunal held that the complaint in respect
of the 2005 Amplats
auction was not time-barred because the prohibited practice had
ongoing effects which were not shown to have
ceased by the cut-off
date. In regard to the Anglo Coal tender, the Tribunal dismissed the
Commission’s belated amendment
application. Notwithstanding
such dismissal, the Tribunal considered whether it should
nevertheless adjudicate that complaint,
having regard to the guidance
afforded by the judgment of the Constitutional Court in
Competition
Commission v Senwes Ltd
[2012]
ZACC 6
;
2012 (2) BCLR 667
(CC). The Tribunal concluded that it should
not do so. This was not because DSI and Videx had not had a fair
opportunity to deal
with the matter in evidence but because the
Tribunal considered that, based upon the evidence presented, the case
was not sufficiently
consistent and coherent. The Tribunal thus found
a single contravention by DSI and Videx, namely the 2005 Amplats
incident. This
was held to be a contravention of s 4(1)(b)(iii)
of the Act covering a period of one year from 2005 to 2006.
Administrative
penalties of R1 848 301 and R4 765 502
were imposed on DSI and Videx respectively.
[10]
Videx (but not DSI) appealed to this
court against the Tribunal’s decision, contending that the
Tribunal had erred in finding
that the 2005 Amplats complaint was not
time-barred and had erred in any event in its computation of the
administrative penalty.
The Commission cross-appealed, contending
that the Tribunal should have found that there was an overarching
agreement and thus
that none of the incidents in 2004 and 2005 were
time-barred, and had erred in refusing the amendment application and
in declining
to adjudicate the Anglo Coal incident. The Commission’s
conduct in pursuing the cross-appeal only against Videx (and not also

DSI) strikes us, regrettable as it is to so say, as unprincipled,
because there would appear to be no material distinction between
the
position of Videx and DSI in that regard. However, as a matter of
procedure the Commission is not precluded from following
its  course,
though, if the cross-appeal succeeds, our finding would be binding
only as against Videx.
[11]
It is convenient here briefly
to elaborate on the significance of the question whether there was an
overarching agreement. If there
was an overarching agreement during
2004 and 2005 of which the various incidents were merely acts of
implementation, the onus would
rest on Videx to show that the
overarching agreement came to an end before the cut-off date of 26
January 2006. This would require
a clear act of termination of or
withdrawal from the cartel. It would not be enough for Videx to show
that the last act of implementation
was the Harmony incident in
October 2005. In any event, if the Tribunal was correct in holding
that the prohibited conduct constituted
by the 2005 Amplats collusion
had not ceased by the cut-off date, and if that particular collusion
was merely one aspect of the
implementation of an overarching cartel
agreement, the non-cessation of that particular prohibited practice
would simultaneously
establish the non-cessation of the overarching
agreement. It would follow, on either of these lines of reasoning,
that the prohibited
practice constituted by the overarching agreement
had not ceased by the cut-off date and that Videx should have been
found to have
contravened s 4(1)(b) of the Act over the period
from 2004 until the cartel terminated. In the imposition of an
administrative
fine, regard would then need to be had to all the
incidents in 2004 and 2005, and not merely the 2005 Amplats incident.
[12]
Furthermore, a finding that there was
an overarching agreement in 2004 and 2005 which had not been
terminated by 26 January 2006
would have implications for the
assessment of the Anglo Coal incident. If the Anglo Coal incident was
an
ad hoc
occurrence, it
might be open to a participant at the relevant meeting to say that it
was a passive bystander with no part in the
alleged agreement reached
at the meeting. By contrast, if the Anglo Coal incident was simply
another meeting of the cartel members
in implementation of an
overarching agreement, the fact that one of the cartel members had no
direct interest in that particular
act of implementation would not
exonerate it from participation in the ongoing cartel. This case
requires  a determination
of the requirements for an agreement
of the kind which would fall within the scope of s 4(1)(b) of
the Act.
Was there an overarching agreement?
[13]
Prohibited conduct in the form of an
overarching agreement would require there to be the requisite element
of consensus as described
in
NetStar
(Pty) Ltd & Others v Competition Commission of South Africa &
Others
2011 (3) SA
164
(CAC) paras 25 and 26 and
MacNeil
Agencies (Pty) Ltd v Competition Commission
[2013]
ZACAC 3
paras 53-56. As stated in
MacNeil
,
the requirement of consensus does not mean that such consensus should
amount to a contract at private law. Particularly in regard
to the
per se
prohibitions
in s 4(1)(b), the parties would, by the very illicit nature of
their arrangement, not contemplate legal enforcement.
They need not
even have agreed upon a punishment mechanism. Importantly, the court
added in
MacNeil
that ‘the content of the
consensus need not… rise to the level of precision sufficient
to satisfy the requirement of
certainty applicable to private law
contracts, ie the precision needed to defeat an argument that the
alleged agreement is void
for vagueness’ (para 56). In
Netstar
supra
para
54 the court noted that
‘…
an agreement
arises from the actions of and the discussions among the parties
directed at arriving at an arrangement  that
will bind them
either contractually or by virtue of moral suasion or commercial
interest. It may be a contract, which is legally
binding or an
arrangement or understanding that is not, but which the parties
regard as binding upon them. Its essence is that
the parties have
reached some  kind of consensus’.
[14]
The  definition of agreement in
s 1 of the Act, which includes an arrangement or understanding,
is also to be found in
the relevant Australian legislation, the
Competition and Consumer Act 2010. In dealing with the phrase
‘arrangement
or undertaking’, the court in
ACCC v CC (NSW) Pty
Ltd
[1999] FCA 954
at para 141  said: ‘The cases require that at least one
party assume an obligation or give an assurance or undertaking
that
it will act in a certain way. A mere expectation that as a matter of
fact a party will act in a certain way is not enough
even if it has
been engendered by that party.’ But  it is recognised
that evidence of collusion between the parties,
evidence of price
fixing or the way the understanding was reached between the parties
may be  inferred from circumstantial
evidence: Russell
Miller’s
Australian Competition Law and Policy
2012
at 153-154 .
[15]
It  follows that if in year 1 a
number of competitors reach an agreement, in terms of which they
assume certain obligations
which relate to collusion regarding prices
and/ or customer allocation in that year, and then repeat a similar
exercise in years
2, 3 and 4, a court can surely infer an overarching
understanding or arrangement sufficient to constitute an agreement,
particularly
when each of the parties takes some benefit from each of
the separate agreements. The four separate agreements may not be
sufficient
to justify a conclusion as to the existence, from the
outset of the firms’ collaboration, of an overarching agreement
with
particular terms as to market division or price-fixing; but,
given the  manner in which the legislature expanded  the

scope of agreement in s 1 of the Act, a court is obliged to
examine the evidence presented holistically to determine whether
the
conduct of the parties, as assessed over all the alleged conduct,
justifies, on the probabilities, a conclusion  that
the parties
possessed the kind of understanding that justified their ongoing
collaboration (in our example on an annual  basis)
by engaging
in successive agreements which represented a  close variation
of  conduct  agreed upon at the earlier
meeting (or
meetings).
[16]
The content of the overarching
agreement thus inferred might not be agreement on the specifics of
prices to be charged/tendered
or of customer allocation (that would
happen at meetings held from time to time) but rather an
understanding that the firms will
benefit from ongoing cooperation on
these matters and will thus remain in communication and have an open
door for purposes of working
out details as occasion demands. An
overarching understanding of this kind ‘involves’ (as
that word is used in s 4(1)(b))
price-fixing/bid-rigging or
customer allocation (for example), because it is directed at those
outcomes even though it does not
itself actually fix the prices or
rig a particular tender or allocate specific customers. This is the
sort of understanding that
often gives a cartel its continuing
character. Although the  Act does not use the word ‘cartel’,
it is widely
deployed as a term of convenience in competition
jurisprudence. It denotes some sort of ongoing cooperation; one would
not usually
describe firms which have engaged in an isolated case of
collusion as a cartel. And once one finds the sort of continuing
cooperation
typical of a cartel, it will usually not be hard to
discern the underlying understanding that holds it together.
[17]
This interpretation of s 1 read
with s 4(1)(b) best serves the purposes of the Act. The
distinction between isolated prohibited
conduct and continuing
prohibited conduct is relevant mainly, if not exclusively, to the
time-barring provisions of s 67(1).
Where firms have an
overarching understanding that they will benefit from prohibited
conduct of a certain kind and that they will
thus remain in
communication on such matters, the lawmaker could not have intended
that the more detailed arrangements worked out
from time to time
pursuant to the broad understanding would become time-barred just
because those specific instances occurred more
than three years
before the initiation of the complaint; what would be important is
whether the broad understanding had ceased
more than three years
before the initiation of the complaint (a cessation which would be
manifested
inter
alia
by the absence
of specific manifestations during the three-year period). This is
what we would mean if we said the ‘cartel’
had come to an
end, and we see no reason why the Act should be interpreted in a
manner at odds with this common-sense view.
[18]
In dealing with the argument in the
present case that an overarching agreement existed between  the
parties by which they considered
themselves bound as contemplated in
the
dictum
from
Netstar
to rig tenders and allocate markets
over a period of time as opposed to a series of
ad
hoc
arrangements,
one needs to analyse the precise  case brought by the Commission
before the Tribunal. The Tribunal at para 25
of its determination
found that the Commission had not proved the existence of a single
conspiracy involving all the parties. It
observed, correctly in our
view, that the complaint referral could be read to suggest a single
conspiracy although that required
some generosity of reading. In the
founding affidavit reference is made to a cartel in supplying roof
bolts which may have started
in the 1990s; to a cartel that in more
recent years was ‘resuscitated’ and that cartel meetings
‘continued until
at least October 2007’. The case as
developed by the Commission before the Tribunal dealt not with an
overarching agreement
but rather with separate incidents, each as
constituting an independent contravention of s 4. When the
appeal was argued
before  this court, counsel for the Commission
hardly addressed the exact nature of the alleged overarching
agreement or the
evidential basis upon which such a finding could be
justified.
[19]
For this reason, the conduct of the
Commission dictates caution in determining this appeal on the basis
of an overarching agreement.
But, as this court held in
Netstar
,
‘an agreement arises from the actions of and discussions among
the parties directed at arriving at an arrangement that will
bind
them either contractually or by virtue of moral suasion or commercial
interest’. The question on appeal is whether the
evidence,
analysed holistically and sensibly, justifies on a balance of
probabilities the conclusion that during the period mid-2004
until at
least February 2007 there existed an agreement of this kind between
the four firms, and in particular whether there was
evidence of
either [a] a continued understanding  that they would share the
market more or less equally among themselves and
that they would not
disturb their respective market shares by attacking each other’s
customers with low prices or [b] a continued
understanding at least
that they would benefit from ongoing communication on such matters
with a view to working out detailed arrangements
as market
circumstances might dictate and that each would thus be free to
approach the others with proposals to the end of protecting
their
respective market shares at prices acceptable to them.
The evidence of an overarching agreement
[20]
The existence of a continuing
understanding sufficient to justify the existence of an agreement in
terms of s 4 is largely
a matter of inference from the facts.
Statements by witnesses, particularly in response to leading
questions, that there was or
was not a cartel agreement or that
instances of collusion were isolated
ad
hoc
agreements must
in our view be treated with some caution, because such statements
tend to embody legal conclusions. The witnesses
were unlikely to be
familiar with the legal requirements for an ‘agreement’
as defined in s 1 of the Act. Regard
must naturally be had to
such evidence, but it must be viewed in the context of the facts as a
whole.
[21]
It  is common cause that in
February 2007 a decision was taken by Duraset’s senior
executives that they would no longer
have collusive contact with the
other firms, and this was expressly communicated by Duraset to the
others. The evidence was that
a similar decision was taken by RSC in
September or October 2007 although it is unclear whether that was
communicated to DSI and
Videx. The evidence of implementation beyond
late 2007 is thin. It  is the earlier   events that
require
great attention in determining whether there
was  an understanding  which fell within the scope of
‘agreement’
as defined  in s 1.
[22]
It is convenient here to record our
overall impression of the witnesses as it can be gleaned from the
record (the Tribunal did not
make specific credibility findings). In
the main, the evidence of the witnesses for the Commission reads
well. It is important
to emphasise that although the witnesses in
question had formerly been employed by RSC or Duraset, they were no
longer with those
companies by the time they testified before the
Tribunal. Furthermore, RSC had obtained leniency and Duraset had
settled with the
Commission, so that the interests of those companies
were not directly implicated by the evidence given by the
Commission’s
witnesses. By contrast, the witnesses who
testified for DSI and Videx were still employed by those companies,
which were very much
in the firing line. There was thus a greater
temptation for them to conceal the full extent of the collusion. We
do not regard
their evidence as altogether satisfactory. Henson, Van
der Merwe and Le Roux tried on various occasions to dilute the
damaging
effect of statements made by them during the Commission’s
investigations or in their witness statements or in the answering

affidavits filed on behalf of their companies, and on other occasions
their evidence was vague or evasive.
The
earlier history
[23]
There was evidence that during the
1990s and early 2000s there was already a collusive relationship
between RSC, Steeledale (which
later sold the business which became
Duraset to Grinaker) and Videx. Videx was initially a sub-contractor,
supplying components
to RSC and Steeledale. Henson, who was formerly
employed by RSC but broke away to form DSI in 2002, stated that a
cartel existed
between RSC, Videx and Steeledale/Duraset during the
1990s and that he attended meetings of the cartel (as a
representative of
RSC) over the period 1996 to 2001.
[1]
The essence of the understanding was
that the firms would not interfere with each other’s customers,
thus helping to maintain
margins.
[2]
Videx, which entered the market
directly in about 1994, was approached by RSC in about 1996 with a
view to persuading Videx not
to target their customers. It appears
that Videx allowed itself to be drawn into arrangements of this kind,
because Bornman claimed
that in early 2000 he received an email from
Videx’s Le Roux requesting Duraset to provide cover prices for
Videx on a tender
which Harmony was issuing (Harmony being by then a
‘Videx customer’). Le Roux informed Bornman that he was
making the
request in terms of ‘old agreements’ to which
Steeledale had been a party. Bornman’s colleagues at Duraset
confirmed
to him that he should cover Videx, which he did. Videx gave
him the price he was to tender. Bornman was told by his colleagues
that there were certain market arrangements in place which he had to
honour, Harmony being one of them.
[24]
DSI, a breakaway from RSC with Henson
at the helm, entered the market in 2002. DSI began to acquire market
share, mainly at the
expense of RSC while Videx was gaining market
share, primarily from Steeledale. According to Videx’s
answering papers, this
led to a meeting initiated by Steeledale at
the latter’s head office in Germiston, at which RSC might also
have been present.
Steeledale wished to stabilise the market and
proposed an agreement for the retention of existing market shares.
Steeledale also
wanted Videx to undertake not to supply product to
the new entrant, DSI. Videx’s representative at this meeting,
Moshe Josef,
claimed in his affidavit that ‘nothing specific’
was agreed at the meeting. However, Videx did not claim to have
rebuffed
Steeledale’s approach, and DSI stated in its answering
papers that it had indeed been thwarted by the other three firms in

its endeavour to enter the market - Videx had refused to supply it
with components, as did Duraset’s steel supplier Scaw
Metals
and the Murray & Roberts steel mill CISCO.
[3]
Henson also stated, in his
interrogation by the Commission, that because the cartel had been in
existence for some years the margins
being earned by RSC, Duraset and
Videx were extremely good. It was this that enabled DSI quickly to
win market share with lower
prices.
[4]
[25]
Josef admitted in Videx’s
answering affidavit that there were other meetings of this kind in
the period 2002-2003 and that
at some stage RSC acknowledged DSI as a
fourth player in their industry meetings. Le Roux explained in
cross-examination that Videx
had been vulnerable as a small player
and that it had been told by RSC and Steeledale (later Duraset) to
toe the line. He said
that if Videx had ignored cartel meetings and
chosen not to attend, it could have lost business. He placed the
termination of this
collusive relationship in late 2005 as a
consequence of RSC’s behaviour in the Harmony tender. That is a
matter to which
I shall return later.
[26]
After Steeledale sold its mining roof
bolts business to Grinaker, that business (trading as Duraset) became
a somewhat unreliable
member of the cartel. Initially the ‘old
agreements’ appear to have been honoured. However, there were
times when Duraset
actively attacked the other firms. Bornman’s
evidence was that he would give commitments to the other firms during
meetings,
which he understood to be in accordance with approved
arrangements, but would then find himself countermanded by Duraset’s

managing director, Johann Smit. Bornman alleged that on 19 November
2002 he and Smit attended a meeting with Le Roux and Josef
at Videx’s
invitation. Videx’s representatives tried to convince Duraset
to adhere to the old agreements with Steeledale.
Smit said that
Duraset was not interested in doing anything which contravened the
Act. There was a further meeting to similar effect
on 21 January 2003
where Smit repeated his position.
[27]
Bornman claimed that it was this
refusal by Duraset which caused Videx to attack Duraset’s
business with Lonmin in May/June
2003. Videx threatened that it would
take away the Lonmin business with predatory prices and in due course
acted on this threat.
Bornman said that Duraset countered with a
price which was just about at break-even level. Videx then offered
Lonmin a further
rebate, which Duraset believed was below cost.
Duraset lost a considerable volume of business as a result of this
attack and had
to lay off people. Smit then wanted Videx to surrender
the Lonmin business back to Duraset.
Industry
meetings: 2004-2005
[28]
Subsequent to Videx’s attack on
Duraset’s Lonmin contract, RSC and Duraset began to call
meetings with the other firms
more frequently in order to ‘stop
the bleeding’. We have already alluded to Le Roux’s
explanation as to why Videx
attended such meetings. It is clear that
Videx previously had a collusive relationship with RSC and
Steeledale, that Videx wished
Duraset to honour these arrangements,
that when Duraset refused to do so Videx ‘punished’
Duraset by taking away a
large customer (Lonmin) at very low prices,
and that this forced Duraset back to the table. Josef, who deposed to
Videx’s
answering affidavit, said that between 2004 and 2005
there were about ten to twelve industry meetings, mainly at RSC’s
offices
in Wadeville. The main topic of conversation was market
stability. Videx’s perception was that RSC and Duraset were the
most
anxious of the firms as they were losing market share. Videx
felt it had to attend the meetings in order to operate in the
industry
and be seen as a serious player and in order to gather
market intelligence. Josef said that there were tentative discussions
about
allocating market shares but ‘nothing specific’ was
agreed. Importantly, Josef added the following in Videx’s

answering affidavit: ‘There was, however, broad agreement that
we should all “respect each other’s businesses”
and
stop attacking one another’s customers’  though he
claimed that this made little difference in practice because
the
so-called ‘agreement’ was ‘largely ignored’.
[5]
Josef had made an identical
allegation in a statement submitted to the Commission as part of its
investigation.
[6]
[29]
Le Roux attempted to dilute this in
his oral evidence, saying there ‘was an intent to get to an
agreement’ but ‘it
never materialised’ and that if
it had ‘there wouldn’t have been the market dynamics that
took place’.
[7]
He also said that Videx had gone to
these meetings ‘with probably malicious, misleading intent, to
listen, learn, observe
and do what we wanted to do’.
[8]
Elsewhere, however, he conceded the
existence of what he called the
status
quo
principle
during 2004 and 2005
[9]
and later said: ‘There was a
situation of
status
quo
, in general. It
wasn’t specific incidents, but there was a high level, despite
supposedly to be remaining
status
quo situation, there was a high level
of interaction activity that took place.’
[10]
He gave several examples (other than
those specifically alleged by the Commission) where the
status
quo
principle was
applied, namely Exxaro/Isizwe, Total’s Dorsfontein mine and
Xstrata/BHPP Billiton. (He also gave, as an example,
Impala Platinum,
but later retracted it, saying that the Impala business had always
been heavily contested between Videx and Duraset.)
[30]
According to Henson of DSI, Videx was
responsible for inviting DSI to attend three industry meetings of
this kind in early 2004.
He speculated that RSC and Duraset had asked
Videx’s Josef to make the approach because Henson did not have
an amicable relationship
with the senior executives of RSC or
Duraset.
[11]
It will be recalled that the other
three firms had not made life easy for DSI as a new entrant. Henson
said that DSI attended these
meetings in the hope that issues between
itself and the other firms could be resolved. Initially this did not
transpire as the
meetings were acrimonious and representatives of the
other firms levelled insults at him. (Since Henson had left RSC to
establish
DSI and since its early market share had been acquired
largely at the expense of RSC, it is entirely plausible that he would
have
been viewed with hostility, particularly by RSC.)
[31]
We have mentioned that in about
May/June 2003 Videx had successfully targeted Duraset’s Lonmin
business with very low prices.
Duraset wanted the business back and,
according to Bornman, succeeded in forcing Lonmin to issue an open
tender in February/March
2004. On 11 March 2004 Josef of Videx sent
Bornman an email with prices at which Duraset should cover Videx in
the forthcoming
tender. Duraset refused to cooperate and tendered
much lower prices. Videx again had to drop its prices even further to
retain
the business.
[32]
Cawood of RSC said in his witness
statement that all the firms were making losses on their contracts
with the mining houses and
that the meetings in early 2004 were held
to achieve cooperation to rectify the situation. This was confirmed
by Henderson, who
referred to an important meeting at Bruma Lake
Holiday Inn to explore the formation of an ‘industry
association’ (a
euphemism, we think, for a cartel). He said
that discussion at the meeting moved in the direction of upcoming
tenders. Proposals
were made about market division to resolve the
devastating price wars. Duraset was accused of intruding on the other
firms’
territories while DSI was accused of attacking RSC’s
traditional markets. He said that the firms agreed that an accurate
market share assessment should be conducted and that they should not
target each other’s business. Henderson testified that
a
position emerged where the parties had roughly equal market shares
because they were not undercutting each other. He acknowledged
in
cross-examination that there were various features of the mining roof
bolt market which made it very difficult and complex to
arrive at an
equal allocation.
[33]
In his answering affidavit and
witness statement for DSI, Henson stated that after the
second
Amplats tender an attempt was made to
allocate market shares between the firms. He was invited to a series
of meetings for this
purpose. A spreadsheet was tabled by either RSC
or Videx ‘and the respondents agreed in principle that the
market would be
divided equally’. However, it was agreed, he
said, that shepherds crooks (grouting rods) would be excluded from
the cartel
arrangements because so many other suppliers in South
Africa had the ability to supply them. Although the second Amplats
tender
was in May 2005, Henson in his answering affidavit proceeded
to refer to a spreadsheet dated 7 September 2004 (see below) and
speculated
in his witness statement that this may have been discussed
at an ‘industry breakfast’ on 10 September 2004 of which

he had a record in his diary. He also, in the answering affidavit,
stated that the discussion in question occurred ‘in or
about
2004.’ We thus suspect that Henson’s reference to the
‘second’ Amplats tender is an error and that
he must have
intended to refer to the first Amplats tender in 2004. He also
admitted in DSI’s answering affidavit that DSI,
together with
the other three firms, contravened the Act from at least mid-2004
until approximately mid-2005 ‘in that it
engaged in collusive
tendering by allocating tender contract customers for mining bolts
between itself, RSC, Duraset and Videx
in accordance with an agreed
market share and by agreeing prices’.
[12]
His evidence of a broad agreement in
principle accords with what certain of the other witnesses said as to
the outcome of the meetings
in mid-2004.
[34]
In chief Henson initially denied that
there had been any agreement regarding the sharing of the market.
[13]
However, towards the end of his
evidence in chief he said that there was ongoing discussion about
market shares, even into 2006.
There was an agreement in principle to
divide the market equally but DSI was ‘to a large extent on the
outside of this’
because it had a limited product range. He
also said that for various reasons it was impossible practically to
implement the agreement
in principle.
[14]
First
Amplats reverse auction
[35]
One of the first occasions the
parties had to implement their broad understanding was in relation to
a reverse auction conducted
by Amplats. The four firms all had some
part of the Amplats business. A reverse auction is one in which the
suppliers of a product
bid prices down, with the lowest bid being the
price at which the customer (here Amplats) will buy the product from
the successful
bidder. The auction was to be conducted over the
internet in real time. It is obvious that Amplats followed this
course because
it believed that by way of a reverse auction it could
get lower prices than those it was already paying under its existing
contracts.
(Contracts with the large mining houses appear to have
been evergreen though terminable on notice.) Meetings were held among
the
four firms in the period April-June 2004 in relation to this
tender with a view to ensuring that they would each win an agreed
share of the business at prices they regarded as reasonable. Although
the meetings earlier in the year with DSI had not succeeded
in
drawing DSI into the cartel, DSI succumbed at this stage. Henson in
his evidence offered the explanation that DSI had very rapidly

increased its market share and had financing constraints due to the
liquidation of its German backer. It suited Henson’s
agenda to
‘catch his breath’ and consolidate his existing market
share.
[15]
Duraset, which earlier in the year
had failed to regain the Lonmin business from Videx, also cooperated.
Spreadsheets were prepared
to indicate where the bidding should start
and where it should end and which lots were to be won by which firms.
The firms remained
in contact with each other for the duration of the
online auction, which took place on 24 June 2004. It was an elaborate
fraud
on Amplats. In the event Amplats did not accept any of the bids
(because they did not drop as low as Amplats expected), and each
firm
seems to have retained their existing business at the same prices as
before.
Anglo
Gold
[36]
At about the same time a tender was
issued by Anglo Gold. This was not one of the incidents concerning
which detailed evidence was
led at the trial but that there was
collusion, at least between Duraset and Videx on this Anglo Gold
tender, is clear from an email
of 22 June 2004 which Bornman sent to
Avichay Josef of Videx.
[16]
We quote from the email not so much
to establish that there was collusion as to indicate the ease with
which the firms communicated
with each other on patently illicit
arrangements:
‘
I
am forwarding you the prices to be submitted by yourselves. Please
pass it on to Leon [Le Roux] and/or Moshe [Josef].
Please note that these prices
include delivery to the mines and exclude VAT. The prices you submit
are between 4%-6% above ours.
In the tender documents a question
relating to the time period of fixed prices to the mines must be
stated. We are stating that
we will hold prices for as long as we do
not receive any price increases from the steel mills of South Africa.
Should you need any more
information please contact me.’
[37]
This letter does not read as an
unexpected proposal. It indicates an easy relationship between
competitors in bid-rigging so that
a traditional supplier can retain
its business. In fact, Le Roux in his evidence said that Videx had
presented this particular
email as an annexure to its answering
affidavit to explain that it was not only Videx that was asking
Duraset for cover prices;
Duraset also asked Videx for cover
prices.
[17]
The answering affidavit added that
there might be other similar emails or faxes of which Videx no longer
had a record.
The
market share email
[38]
Since it is relatively unusual to
find cartel members committing their illicit proposals to writing, an
email sent a couple of months
later, on Tuesday 7 September 2004, by
Henderson (RSC) to Le Roux (Videx) and Henson (DSI) assumes
considerable importance.
[18]
Attached to this email was ‘the
updated roof bolt market share’. Henderson said that they could
discuss and verify this
at their meeting on ‘Friday’. The
Friday was 10 September 2004; Henson had a diary entry indicating
that an ‘industry
breakfast’ was held on that date.
Although the email does not reflect Duraset as an addressee, the
attached table included
a Duraset market share. The total market
shares as estimated in the table were the following: Videx –
25,26%; Duraset –
13,38%; RSC – 29,84%; DSI –
21,67%; others – 9,4%. While there may have been difficulty in
finding a uniformly
acceptable approach to determining market shares,
the sending of this email, with the intention of discussing it at a
meeting a
few days later, is consistent with an earlier general
understanding that the parties would aim for roughly equal market
shares.
Non-contract
business
[39]
We shall deal with other mining
auctions and tenders presently. However, it is necessary to emphasise
at this stage that the cooperation
between the firms did not relate
only to the big contracts with mining houses but also to small
non-contract business. Cawood,
who was employed by an unrelated
entity by the time he gave evidence, gave entirely convincing
testimony on this aspect. He said
the following in chief:
[19]
‘
Duraset
or some of the other guys, on the day-to-day business, there were
numerous transactions or telephone discussions between
Neville
Henderson and his equals in the various companies. It was not only in
regard to the major contracts, but the smaller items,
the day-to-day
discussions were used to build a level of trust leading up into the
tenders and to also gauge whether the other
players are playing by
the rules that were set out by the various companies… The guys
that I was competing against were
the Videx sales people and Duraset
sales people who have historically been in all of the market
segments. So, to list examples
from DSI would be difficult. On the
Videx side and the Duraset side there were multitudes of examples
where customers would tell
me that they’ve received better
prices from Videx or from Duraset or someone else has quoted them
better or lower prices
than what we have. I would then report that
matter to Neville Henderson. Neville would say to me, Martin, don’t
worry, I
will get hold of the respective companies and I will sort it
out in the next day or a day or two later, when I went back to the

office, he would say Martin this issue had been addressed and it’s
been sorted out and you can continue with your normal
business.’
[40]
In cross-examination by DSI’s
counsel he confirmed that he had not personally been at the meetings
with the other firms; that
was handled by his superior, Henderson.
But he explained why he was able to speak so confidently on the
matter:
[20]
‘
To
the point that the way you stated, it’s correct, but also then
on those agreements, if those were not in place and those
agreements
were not as they were discussed and explained to me by Mr Henderson
or Mr Koszewski, there were things that miraculously
then disappeared
overnight from this customer interfering with my customer over here.
I reported to Neville. Tomorrow morning or
two days afterwards such a
meeting, that problem no longer exists and it is true when you say I
cannot give you exact dates.
It is not on the contracts. On
the contracts it’s easy to go and pull out on records all the
dates and the tenders. On the
day-to-day issues it’s not a case
that there were ten or twenty or fifty of them. They were numerous,
as in many, many, many
of them and if I pull out any ten of them,
anyone else would be able to pull out fifty and say why did you not
mention these ones?
And that’s where you determine which are
the guys that are playing, if I can call it like that, according to
the rules that
were agreed in those meetings.’
And
later in cross-examination:
[21]
‘
ADV
ENGELBRECHT: Yes, and every now and again part of that would be a
complaint about another supplier supplying to your customer.
MR CAWOOD: Yes.
ADV ENGELBRECHT: Yes, and you
would complain about this.
MR CAWOOD: Yes.
ADV ENGELBRECHT: It was a bit of
whingeing why…
MR CAWOOOD: No, no, no, no
sometimes it was straight, get up from my desk, walk around to
Neville’s office and say Neville,
someone is quoting at
Kroondal, please sort this out. Okay Martin, I will get back to you
now. He would be on the phone for 10
or 15 minutes, later come back
and say that’s sorted out, continue.
ADV ENGELBECHT: And was it
always sorted out?
MR CAWOOD: In most of the cases,
yes, and not necessarily always in our favour. Sometimes it would
have been said we quoted on this
place because you quoted somewhere
there. Either you go and fix then, then we will fix this. So, there
had always been that it
wasn’t always in our favour.’
He
said that he himself was taken to task for approaching certain
customers:
[22]
‘
MR
CAWOOD: No, I was rapped over the knuckles a few times for going to
certain customers and then I had to go back and go and explain
to
them whatever the reason I could come up with why I made a mistake
and why I would not be able to deliver and supply.
ADV ENGELBECHT: Okay, and
you were told that was because there was an agreement.
MR CAWOOD: There was an
agreement between suppliers that these are these [his?]  customers,
these are your customers. You deal
with these customers. What are you
doing over here? You are supposed to be here. You know that these
customers are Videx, Duraset,
DSI customers.’
[41]
Videx’s counsel also sought to
undermine Cawood’s evidence on this aspect, the context being
the supply of a particular
type of bolt to the Elandsrus mine:
[23]
‘
MR
CAWOOD: No, it’s not a roof bolt, but it is used in conjunction
with the roof bolt in bad ground conditions, but those
were the sorts
of items that you would quote on and then very quickly it will come
back saying, hey, you guys are overstepping
the line, don’t
quote our customers.
MR BUTLER: Mr Cawood, I wanted
to put something to you and it might just shorten the
cross-examination that is to come. The impression
I get is that your
memory on this sort of conduct that you are talking about is quite
hazy.
MR CAWOOD: I wouldn’t say
it’s hazy. There were a number of instances where it has
happened, but it’s not something
that you try and memorise that
I‘ve spoken to Leon [Le Roux] this morning regarding a split
set. It’s not something
that is indelibly imprinted in your
mind like something extremely serious where you’ve just seen
somebody killed. That you
would remember, but small instances that
happened twenty times a week, I don’t try and memorise all of
those.’
[42]
He also did not accept that this type
of cooperation only took place in 2004 and 2005. He said such conduct
was definitely still
occurring in 2006/ 2007. He said that although
Videx’s Le Roux may not have trusted Koszewski (because of the
Harmony tender
of October 2005) there was still a fair amount of
trust in the later period between Le Roux and Henderson. He said that
the relationship
of trust between those two was still there when he
(Cawood) left RSC in August 2007 and that there was still cooperation
on day-to-day
business at that time.
[43]
DSI called Van der Merwe to undermine
Cawood’s evidence. Van der Merwe was employed by RSC until
November 2010 but was with
DSI by the time he gave evidence. It
appears that there was some hostility between himself and Cawood.
[24]
During his time with RSC, Van der
Merwe was involved in the supply of roof bolts for soft rock
applications (mainly coal mines)
whereas Cawood was responsible for
hard rock applications. Van der Merwe, in his evidence in chief,
disavowed knowledge of any
arrangement in terms whereof customers
were recognised as belonging to particular suppliers. He testified
that over a ten-year
period he was never given an instruction not to
quote for particular customers. When asked as to his knowledge about
collusion
in general, he said there were ‘some rumours, you
know rumours, the guys meet in coffee shops and the guys, the big
shots
meet up there’.
[25]
He said it was possible that market
allocation had been implemented without his knowing about it. He also
said that he worked from
home and was not at the office very
much.
[26]
[44]
A somewhat different picture emerged
after the Commission’s counsel asked for an adjournment to take
instructions on Van der
Merwe’s evidence (DSI had called him on
short notice). During the adjournment the Commission obtained a
transcript of the
interview which RSC’s attorneys conducted
with Van der Merwe on 15 July 2008 while he was still employed by
RSC. This was
in the context of the RSC investigations which led to
the leniency application lodged in September 2008. In that interview
Van
der Merwe said that he often met for breakfast with his
counterparts at Duraset, DSI and Videx. He said that they did not
discuss
their prices though they would talk about the steel price
increases they were facing. He made reference to disciplinary action
which Henderson had taken against him in mid-2007 for taking away
DSI’s Dorstfontein customer (though the reason given for
the
disciplinary action was that he had given the Dorstfontein customer
an unauthorised price reduction). He said this followed
an angry call
from Henson to Henderson and Koszewski. He told RSC’s attorneys
that he had often been warned about going to
other suppliers’
mines. He also said that Henson phoned Koszewski on a regular basis
to complain that he (Van der Merwe)
was ‘stirring up’ the
market (he used a blunter expression which the transcriber, out of
delicacy, declined to type).
He agreed that there was an
understanding that certain mines were his while others belonged to
the other firms.
[27]
[45]
Under cross-examination Van der Merwe
attempted to distance himself from some of the more damaging
statements he made during this
interview, claiming that he was not
fluent in English (which we accept) and that he just wanted to get
finished with the interview.
However, we reject the notion that he
did not understand the import of what he was saying. He was the one
who, when asked whether
any arrangements existed between RSC and its
competitors, volunteered the information about the disciplinary
action taken against
him. He said that this action was taken against
him because he went on to a DSI customer’s mine, which he was
not meant to
have targeted. When asked whether this sort of thing had
happened more than once, he said ‘well, I’ve actually
been
warned every time, Lukas you don’t go to other mines,
don’t go to other mines’. When asked which mines he was

told were ‘off limits’, he replied that it was his
competitors’ mines, and he then confirmed that there had been

an understanding that certain mines were his while others belonged to
his competitors. He could not explain under cross-examination
how he
had come to say this to RSC’s attorneys if it were not the
truth.
[28]
His version during the interview is
consistent with the testimony of the Commission’s witnesses,
though we are prepared to
accept that Van der Merwe chafed at the
restrictions which his seniors at RSC wished to impose on his
competitive behaviour (perhaps
because it affected his commission
income) and that he did not always heed them.
Goldfields
[46]
Returning to the big mining
contracts, the next large one was the Goldfields online reverse
auction. Although the Commission in
its referral affidavit placed
this incident in September 2005, and although some of the witnesses
followed suit, Le Roux of Videx
said that it occurred in
September/October 2004. This is borne out by the Request for
Information issued by Goldfields
[29]
and by Videx’s contemporaneous
incident report of the Goldfields auction.
[30]
We have already mentioned that
Duraset was an unstable member of the cartel. Although Duraset had
cooperated in the Amplats reverse
auction, it was perceived in the
second half of 2004 not to be ‘playing the game’ (Le
Roux’s words in para 12
of his statement) and to be following
an aggressive pricing strategy. Duraset was Goldfields’ primary
supplier. Le Roux said
that for this reason RSC, DSI and Videx
agreed, in advance of the Goldfields auction, to collude to make sure
that Duraset did
not win any of the Goldfields business. Cawood’s
recollection was that when the other firms tried to get Duraset to
cooperate
in the Goldfields auction as it had done in the Amplats
auction, Duraset refused, and this caused the other three firms to
resolve
that Duraset be ‘taught a lesson’.
[47]
The upshot was that the other firms
were successful in excluding Duraset, though this could only be
achieved at what Le Roux described
as ‘pathetically low
prices’. The three firms were in telephonic contact with each
other during the course of the online
auction. Cawood agreed that the
outcome was very favourable for Goldfields but said that in the
greater scheme of things it had
been important to discipline Duraset:
‘We’ve shown Duraset that either you guys come to the
table or you will not have
any of the business and by spreading the
losses between three companies made it a little easier than one guy
to fight one-on-one.’
[31]
[48]
Henson testified that there had been
no collusion between the parties during the Goldfields reverse
auction of October 2004.
[32]
His evidence is inconsistent not only
with that of the Commission’s witnesses but also with Le Roux’s
testimony. We
think that this was one of the instances where Henson
discreditably attempted to distance DSI from collusion.
[49]
Henderson said that there was a twist
in this particular tale. DSI was best placed to supply shepherds
crooks to Goldfields, this
being a significant component of the
tender. Indeed, Henson testified that this had traditionally been
DSI’s business.
[33]
However, it would have been foolish
for the three colluding firms to undercut each other once Duraset
fell out of the bidding (and
because of their cooperation during the
online tender they knew when this occurred). It so happened that
Videx was the lowest bidder
for shepherds crooks when Duraset ceased
bidding, and the price at that particular point was just about at
cost. The result was
that Videx won the tender but then had to
conclude a sub-contract with DSI for the latter to supply Videx with
the shepherds crooks.
From the exhibits it appears that this
sub-contract was formally concluded with an effective date of 1 May
2005 though DSI already
started supplying the product to Videx in
2004.
[50]
According to Henson, DSI advised
Videx in late 2005 that DSI could not continue supplying Videx with
the shepherds crooks for Goldfields
because it was losing money.
Videx then cancelled its supply agreement with Goldfields in early
2006. In his evidence to the Commission
during its investigations,
Henson said that Videx had agreed (ie with DSI) to give up the
Goldfields business ‘in the course
of the reorganisation of all
these market shares and bits and pieces’.
[34]
Goldfields issued a fresh tender in
March 2006 which DSI won, presumably at prices which allowed it to
make an acceptable profit.
Videx did not submit a bid. Henson also
testified in his interrogation by the Commission that when Goldfields
went out to tender
in March 2006, he spoke with Steeledale or its
sister company Duraset to ensure that they would not compete for the
business with
predatory prices, and that as a result ‘there was
collusion and the Steeledale group as a whole respected my prices in
respect
of Goldfields’.
[35]
March/May
2005 – Anglo Coal
[51]
In an RSC executive meeting held on
11 March 2005 it was noted that Duraset was not interested in joining
the ‘roof bolts
forum’ consisting of RSC, Videx and DSI.
The same minute noted that threats to RSC’s business included
the fact that
Amplats, Anglo Gold, Sasol and Ingwe were all going out
on tender.
[52]
Despite Duraset’s apparent
reluctance to join the ‘forum’, Bornman said that in
April 2005 he met with representatives
of RSC and DSI at a coffee
shop in Secunda. The initial focus of the meeting seems to have been
Sasol, because Bornman said that
Videx was not represented as it was
not a Sasol supplier. Be that as it may, RSC at this meeting
requested the other two firms
not to be so aggressive. Bornman told
Henderson (RSC’s representative at the meeting) that Duraset
would not undercut RSC
in the upcoming Anglo Coal tender (which
appears to have been RSC’s particular interest – DSI and
Duraset, by contrast,
were most closely involved in the supply to
Sasol). However, Bornman was later countermanded by Smit, who
instructed him to price
aggressively on the Anglo Coal contract. In
the event, RSC succeeded in retaining the Anglo Coal business but
only by further reducing
its prices – this appears to have been
in May 2005. Bornman conceded in his evidence that he had previously
given his word
to RSC that Duraset would not undercut RSC and that he
broke his promise on the instructions of Smit.
[53]
This tussle in regard to the Anglo
Coal business is not to be confused with the main Anglo Coal
incident, which occurred in the
first half of 2006. However, the
price battle between RSC and Duraset in May 2005 in regard to Anglo
Coal is an important precursor
to the events of 2006.
Second
Amplats reverse auction – May 2005
[54]
As to the upcoming Amplats tender
mentioned in the RSC minutes of 11 March 2005, representatives of all
four firms met in order
to rig the online auction as they had done in
June 2004. According to Bornman, the meeting to settle these details
took place at
RSC’s Wadeville factory. Videx was represented by
Josef and Le Roux. Others present included Henderson, Henson and
Smit.
According to a Videx incident report, the auction took place on
21 May 2005.
[36]
Videx and DSI admitted their
participation in this collusion. Once again, the prices, because of
the rigging, did not drop to a
level which Amplats found acceptable.
[55]
In 2004, in similar circumstances,
Amplats had simply continued with the pre-existing contracts. On this
occasion, however, it engaged
each of the firms in negotiation, as a
result of which in some instances prices were achieved that were
lower than the lowest rigged
bids but probably not as low as they
would have fallen in a non-fraudulent reverse auction. Henderson’s
perception was that
the firms generally retained their business at
the pre-existing prices (which were lower than those they had hoped
to achieve in
the auction).
[56]
Videx said that, although it
participated in this collusion, it only realistically faced
competition in regard to one of the products
namely flexible
eyebolts. Of the other two products for which it bid, its lacing bolt
was a patented product, and it was also the
only entity offering
combo-coupling bolts. Videx, in the individual negotiations, could
hold its price (ie at the rigged levels)
on the latter two products.
In regard to flexible eyebolts, the price was low due to competition
from Duraset, and the price at
which Videx got the flexible eyebolts
business was as low as Videx was prepared to go. Le Roux also
testified that in the negotiations
between Amplats and Videx the
former used prices allegedly offered by other firms (not necessarily
the other respondents) in an
attempt to get Videx to drop its prices.
Sasol/Xstrata
[57]
At about the same time (mid-2005)
there was a collusive discussion between DSI and Duraset regarding
supply to Sasol, being an arrangement
which was of particular
significance to those two firms. At about this time Sasol awarded 25%
of its business for the supply of
roof bolts in its coal mining
operations to Duraset, the balance being with DSI. Sasol intimated to
DSI that unless it could match
Duraset’s prices on the 25%
already supplied by the latter, Sasol would award a further 15% of
its business to Duraset.
[58]
Henson of DSI and Bornman of Duraset
had discussions in which Henson agreed that DSI would not resist the
awarding of a further
15% of Sasol’s business to Duraset by
undercutting Duraset’s prices, provided Duraset agreed not to
bid on an Xstrata
tender which was to be issued later in the year. It
is common cause that an agreement to this effect was reached. DSI
kept its
side of the bargain, though according to Henson the
agreement was a bluff from his side, in the sense that DSI had in any
event
not intended to defend the further 15% of the Sasol business
with lower prices. According to Bornman’s evidence, Duraset
also honoured the arrangement. Although he was told by Smit that he
should bid on the Xstrata contract, Duraset did not bid aggressively

but only for ‘appearances’ sake’.
[37]
[59]
An incident of this nature cannot in
our opinion be viewed as an
ad
hoc
arrangement
standing outside the cartel. It is entirely consistent with an
overarching agreement in which market shares are respected.
It just
so happens that in relation to the Sasol and Xstrata business only
two firms had a direct interest, so the precise implementation
of the
broader understanding was worked out among themselves. We would add
that there was evidence that Le Roux called Henderson
at some stage
to ask RSC to provide cover prices for Videx in relation to Xstrata
business. Whether this was different to the business
that DSI and
Duraset were discussing is unclear. Mr Butler for Videx put to
Henderson that Le Roux accepted that he might have
spoken to
Henderson about covering Videx on an Xstrata tender but that this was
in November 2005, and not in 2006 (as Henderson
had earlier stated).
Harmony
– August-October 2005
[60]
The next significant tender was the
one issued by Harmony. There is some uncertainty as to the date. The
Commission alleged that
Harmony issued the tender during October
2005. On the other hand there are Videx incident reports relating to
the Harmony tender
dated 19 August 2005 and 1 September 2005
respectively.
[38]
Videx had been Harmony’s main
supplier for several years. The four firms recognised Harmony as
being Videx’s customer.
However, according to Videx, Duraset
managed to persuade Harmony to test the market again by going out to
tender. Bornman of Duraset
then phoned Videx’s Le Roux to say
that Duraset wanted a share of the Harmony business. Josef surmised
that this disruptive
action by Duraset was in retaliation for the way
Duraset had been squeezed out of the Goldfields reverse auction in
late 2004.
Be that as it may, this ‘rocking of the boat’
led to further discussions between the firms in which it was agreed
that
Videx could retain the business and that RSC and Duraset would
provide higher cover prices.
[61]
In his evidence Cawood confirmed that
he was informed by Henderson of this agreement. He was told that
historically Harmony had
been the business of Videx and was to remain
so, and he was given the prices to insert in the tender. This would
be consistent
with the overarching understanding between the firms.
The absence of DSI from these discussions is of no moment, because
DSI had
no interest in supplying Harmony.
[62]
However, there then occurred an event
on which Videx was to place great reliance in the Tribunal hearing.
RSC cheated and submitted
prices for Harmony which were lower than
Videx’s. (Duraset also cheated but its prices were not the
lowest.) Harmony told
RSC that it would be getting the business, and
supply started. Several weeks later there was an underground failure
at Harmony,
and Harmony concluded that RSC’s product was
technically deficient. Harmony offered the business back to Videx but
at lower
prices. Videx thus regained the business but at prices which
it regarded as being close to cost. Videx felt desperate to win the

business back because Harmony provided Videx with critical volume.
[63]
According to Henderson, RSC decided
to renege because it had heard through the grapevine that Duraset was
not going to honour the
agreement. Koszewski admitted that RSC had
gone back on its word. His explanation, given in response to
questions from the Tribunal,
was the following:
[39]
‘
MR
KOSZEWSKI: The industry was in a price war, everybody was bleeding
and Videx enjoyed super profits at Harmony and the strategy
that was
developed was to get the contract away from them or if we weren’t
successful then at least force the prices down.
CHAIRPERSON: And achieve
what by doing that?
MR KOSZEWSKI: Well to bring
Harmony, sorry, to bring Videx into a level more consistent with the
other respondents in the industry.
They were hurting less than the
other respondents as a result of the prices at which they –
that they had at that point in
time with Harmony.
CHAIRPERSON: And if they
hurt more what did you think the outcome would be?
MR KOSZEWSKI:That in the event,
well that was the precursor to the events that occurred later that we
would be able to bring them
to the table to talk about trying to
stabilise the market and make it less volatile and hostile.
CHAIRPERSON: So are you saying
the strategy was then to, if you could hurt them they would come to
the table?
MR KOSZEWSKI: Well I would like,
we believed that that might be inducive or induce them to be more
amenable to talking.’
[64]
Cawood confirmed that at the last
minute he had been instructed to change the tender by inserting low
prices. As he understood it,
RSC felt that a statement needed to be
made in the industry that RSC would not allow companies like Videx to
profiteer. On questioning
from the Tribunal, Cawood surmised that the
objection to profiteering was that Videx might then be able to
undercut the other firms
on other contracts.
[40]
[65]
Videx’s contention before the
Tribunal was that RSC’s conduct in the Harmony tender destroyed
all trust which Videx
had in RSC. When he gave his oral evidence, Le
Roux was plainly aware of the significance of the cut-off date.
Regarding the Harmony
incident, he said the following:
[41]
‘
The
dynamics, everything, whatever changed for us at Harmony. Everything
changed for us at Harmony. So, I’m not even going
to say up
until January 2006. That thing stopped for us, the interest, prices,
agreements, understandings, everything was canned
at Harmony.’
A
short while later, in explaining the difference between the period
before and after Harmony, he said this:
[42]
‘
MR
LE ROUX:  We were involved though and we thought it was a great
thing, you know, because everybody was giving this thing
lip service.
ADV MOTAU:  Of course.
MR LE ROUX:  Yes and
so I’m not denying that aspect. It’s just that the
crucial thing is to place in Harmony
that shattered the whole thing
apart for us, and that was the end of it… If you mention
January 2006, I do not want to entertain
that date, just as a matter
of principle. That was beyond my sell-by date of this whole thing.
So, if you refer everything was
hunky-dory up until, for instance,
October or whatever the Harmony incident was, I will say all things
fair, but if you are trying
to extend that date, I have a major
problem in admitting or denying the question… It is not about
a prescription date whatsoever.
I’m not saying or coming with
smart answers here. I’m just talking straight to you. That was
the be-all and end-all
for Videx. It was an event. It wasn’t a
date, which happened to be coinciding with whatever we feel
comfortable with.’
[66]
Koszewski and Henderson conceded that
Videx would have had little reason to trust RSC after this time
although, as noted earlier,
Cawood emphasised that, while Koszewski
was a prickly character, there was still trust between Le Roux and
Henderson. Importantly,
however, there was no evidence that in
consequence of RSC’s behaviour in the Harmony incident, Videx
informed RSC or the
other firms that it was no longer prepared to be
part of collusive arrangements.
[67]
It is significant that the conduct of
RSC did not cause Videx to terminate or withdraw from further
meetings and decisions
which were taken at these meetings. In
other words, the understanding that is evident from the various
meetings from at least 2002
continued, Videx’s dissatisfaction
with  .RSC notwithstanding. In
MacNeil
supra
this court
dealt with the implications of a party’s passive attendance at
meetings where collusive arrangements are discussed.
Reference was
made to the duty in such circumstances to speak, the duty being
founded on considerations of legal policy. The same
duty applies
where a firm has made itself party to a collusive agreement. Some
clear act of termination or distancing is required
before the firm
can be held to have extracted itself from the cartel. A loss of
trust, even a significant breakdown in trust, is
not sufficient if
unaccompanied by other actions which clearly signal withdrawal from
the cartel. After all, cheating is a common
feature of cartels. The
level of trust among cartel members may fluctuate significantly over
its life. There was no evidence of
distancing, even after the trust
with RSC was broken .
11
November 2005
[68]
I accept on the evidence that,
following the Harmony incident in October 2005, trust between Videx
and RSC was probably at an all-time
low. Yet, as noted,  not
only did Videx not signal clearly its intention to withdraw from the
collusive relationship among
the four firms; it proceeded to attend
meetings where there were collusive discussions. According to Bornman
and Henderson there
was a meeting on 14 November 2005 attended by
representatives of all four firms. The meeting took place at
Duraset’s offices.
According to Bornman, Koszewski proposed an
equal division of the market. Although Bornman used the word
‘proposed’
in his witness statement, it is clear from
other evidence that a broad understanding to this effect had already
been reached. It
is more probable that Koszewski was attempting to
reinforce and refine an existing broad understanding. Smit’s
response was
that while equal market division sounded very
attractive, there was no practical way to achieve it, given that the
firms’
products differed in value and cost.
[69]
According to Bornman, Koszewski also
urged Duraset to terminate its efforts to increase its market share
of the Anglo Coal business.
It will be recalled that earlier in the
year Duraset had attacked RSC’s Anglo Coal business, and RSC
had only been able to
retain it by dropping its prices. At the
meeting of 14 November 2005 Koszewski threatened to attack Duraset’s
business with
Anglo Gold unless Duraset backed off. (As appears from
Bornman’s email to Avichay Josef of 22 June 2004, Duraset
itself had
co-opted Videx to provide Duraset with cover prices in
relation to the Anglo Gold tender of 2004.)
[70]
RSC’s anxiety over its Anglo
Coal business and the threat posed by Duraset was a principal focus
of important discussions
which took place in the first half of 2006,
with which I shall deal later. What I note here is that Videx did not
dispute its attendance
at the meeting. What Le Roux said in his
witness statement was that although he attended the meeting, Videx
had no particular interest
in discussions regarding Anglo Gold or
Anglo Coal. He did not, on the available evidence, distance himself
from the discussions
about sharing the market nor did he say that the
firms should not collude, as they were proposing to do, on mining
contracts such
as Anglo Gold and Anglo Coal. There is no suggestion
that legitimate arm’s length business was being discussed at
the meeting
yet Le Roux attended it and apparently remained for its
duration. This is not the conduct of a firm which, because of recent
cheating
by a another member of the cartel, wants nothing more to do
with collusive arrangements.
Position
at end of 2005
[71]
The evidence we have reviewed thus
far may well justify a conclusion that by the second quarter of 2004
there was an overarching
agreement that the firms would share the
market more or less equally among themselves and that they would not
disturb their respective
market shares by attacking each other’s
customers with low prices. However, and as explained earlier, it is
not necessary
to go so far. The evidence at least satisfies us, on a
balance of probabilities, that, even if there was no overarching
agreement
with such specific content, the firms by the second quarter
of 2004 had reached an overarching understanding that collusive
cooperation
between them on tenders, auctions and day-to-day business
was in their interests and that they would, with a view to working
out
details, remain in communication on such matters, ie that their
doors would be open for the purpose of arriving at more specific

arrangements as and when market circumstances made this appropriate.
[72]
In summary, there was a significant
history of collusion among the firms prior to the second quarter of
2004, stretching back into
the 1990s. DSI, the new entrant, had
originally been isolated but in the months immediately preceding the
first Amplats auction
came round to the view that its best interests
would be served by throwing in its lot with the others. The broad
understanding
of preserving market shares in roughly equal
proportions was articulated in a spreadsheet produced in September
2004 and was discussed
at several meetings. In relation to big mining
contracts, the firms reached collusive arrangements, consistent with
the overarching
agreement, in relation to Amplats (in 2004 and in
2005), Anglo Gold, Goldfields, Sasol/Xstrata and Harmony. In the case
of the
Goldfields auction, RSC, DSI and Videx were disciplining
Duraset because of its breaking ranks (the Tribunal itself inferred
that
this was a ‘classic cartel punishment strategy’  -
para 45 of its judgment). Koszewski’s explanation for
RSC’s
cheating on the Harmony tender also involved action designed to
discipline Videx.
[73]
Apart from the large mining
contracts, there were the frequent communications described by Cawood
in relation to non-contract business.
These communications, which
occurred throughout 2004 and 2005 (and beyond), were aimed at
ensuring that one firm did not approach
another firm’s
customers. Given the frequency and ease with which the four firms
communicated with each other on all manner
of collusive detail over
the period 2004-2005, we find it wholly implausible that there was
not some overarching agreement of the
kind we have described.
[74]
In reaching this conclusion, we do
not overlook what the Commission’s witnesses said in general
terms about the state of affairs
at the end of 2005. Koszewski, for
example, testified that it was clear by the end of 2005 that ‘the
cartel activities had
failed’ and that it had also become
apparent that the firms, acting on their own or collectively, could
hurt each other.
There was ‘absolute mistrust’. He also
said that the collusive agreements ‘were very rarely
implemented’
(though we are by no means not sure that this is
borne out by the evidence). Henderson also said, by way of background
to the Anglo
Coal meeting of 2006, that there was a lot of mistrust
in 2005 and that ‘the cartel was not really in effect’,
with
various firms attacking different mines. Bornman, when
cross-examined by DSI’s counsel, said that he did not think
that ‘at
any point in time a cartel existed as in the strict
sense of the word’, that there was cooperation during tender
processes
‘but in the sense that we have got a formal agreement
amongst parties that now we are going to work together that’s

going to happen, that never existed’, and that it was rather a
matter of
ad hoc
cooperation.’
[43]
[75]
However, and as we previously
observed, general statements of this kind which go the application of
the law relating to s 4
of the Act need to be viewed with
caution. The descriptions given by Koszewski and Henderson regarding
the state of play in late
2005 was not that a cartel never existed or
that it had terminated but rather that due to non-observance it had
not succeeded in
delivering the desired results and that trust was
low. The whole thrust of their evidence was that new life was
breathed into the
cartel by the Anglo Coal discussions in 2006.
Bornman’s summary must be viewed in the context of the known
fact that Duraset
was the least reliable of the cartel members.
Bornman elsewhere explained in some detail the awkwardness he
encountered by virtue
of the fact that he would give his word to the
other firms and then be countermanded by Smit. At the strategy
meeting in February
2007, which culminated in Duraset’s
decision to withdraw from all cooperation with the other firms,
Bornman explained to
the board that Duraset had been talking to the
other firms and had cooperated with them on various tenders. The pros
and cons of
cooperation were discussed. we do not know quite what he
meant by the statement that a cartel never existed ‘in the
strict
sense’, as this implies that a cartel existed in some
less strict sense. In terms of the law as set out earlier, the
absence
of a ‘formal agreement’ is not conclusive of the
matter. Bornman’s private views, which were no doubt influenced

by his internal discussions with Smit and others at Duraset, may not
have accorded with the impression he conveyed to the other
firms.
[76]
If there was a continuing
understanding which was manifested by the various meetings and
communications  during this period
then, as I have already
explained, Videx did not terminate or withdraw from the collusive
understanding in late 2005, even
though it had become highly
distrustful of RSC because of the latter’s cheating in the
Harmony tender. Nor did any of the
other firms terminate or withdraw
from the cartel at that stage.
Cessation of prohibited practice – 2005 Amplats
auction
[77]
It is convenient at this point,
before continuing the chronological survey of events into 2006 and
2007, to address the question
whether the Tribunal was correct to
hold that the prohibited conduct constituted by the parties’
collusion in the Amplats
reverse auction of 2005 had ‘ceased’,
for purposes of s 67(1), by the cut-off date of 26 January 2006.
The Tribunal
considered this question on the basis that each of the
acts of collusion associated with the tenders and auctions of 2004
and 2005
were
ad hoc
incidents and not part of a broader
cartel agreement. On the view we take of the facts, this was an
erroneous approach. If a continuing
understanding existed in
2004 and 2005, of which the various acts of collusion were
manifestations, it was not shown by Videx or
DSI that they terminated
their participation in  this arrangement or distanced themselves
from it by the cut-off date. This
would be a sufficient basis for
saying that no time bar operated in respect of the understanding and
of the various ways in which
it manifested itself in 2004 and 2005.
[78]
It is nevertheless desirable to
consider the correctness of the Tribunal’s application of
s 67(1) to the facts as it
found them. The onus was on Videx and
DSI to establish that each of the acts of collusion, viewed as an
ad
hoc
prohibited
practice, had ‘ceased’ for purposes of s 67(1) by 26
January 2006 (see
Paramount
Mills Pty Ltd v Competition Commission
[2012]
ZACAC 4
paras 37-42). We think the Tribunal was probably correct in
holding that, apart from the 2005 Amplats auction, the other
prohibited
practices had ceased by 26 January 2006, either because
the conduct in the event had no prejudicial effects or because those
effects
were likely to have dissipated by January 2006.
[79]
In regard to the 2005 Amplats
auction, the Tribunal did not regard the prohibited conduct as
ceasing at the end of the auction.
The ongoing effects of the
collusion were examined. The colluding firms’ first prize would
have been for each of them to
obtain the lots and prices they had
arranged among themselves in the rigged bidding. Because Amplats made
no award pursuant to
the auction, the first prize was not attained.
There was, however, a second prize (viewed from the perspective of
the colluding
firms), constituted by negotiated prices which avoided
the very low prices which might have been the outcome of a truly
competitive
and independent reverse auction. It was second prize
which the parties achieved. The prices achieved in individual
negotiation
with Amplats seem in general not to have been
significantly different from pre-existing levels, though not as high
as the prices
for which they were aiming in the rigged auction.
[80]
In our opinion, the Tribunal was
correct to examine events beyond the conclusion of the auction. A
prohibited practice is generally
constituted by initiating conduct
followed (if the initiating conduct is successful) by the
anti-competitive effects intended by
the colluding parties. Section
67(1) envisages that a prohibited act will be one which continues
over a period of time and is thus
capable of ceasing. The prohibited
act is thus not constituted only by the initiating conduct but also,
within appropriate bounds,
by its intended ongoing effects. To take a
simple example, if two firms collude with each other to fix prices,
and if each of them
then concludes a three-year supply contract with
separate customers at the fixed prices, the prohibited price-fixing
is constituted
by the initiating act (where the suppliers strike
their secret illicit deal) and by the conclusion and performance of
the resultant
contracts with the customers.
[81]
This accords with what this court
said in
Paramount
Mills supra
para
44:
‘
Secondly,
it is clear, upon a proper reading of para 93.3, that the prohibited
conduct which is pleaded and in which Paramount is
alleged to have
participated is the fixing of the selling prices of maize meal
products and the timing of future price increases.
As correctly
pointed out by Mr Unterhalter, the prohibited conduct does not end or
cease with the conclusion of the agreement fixing
the selling price.
It continues to exist and its effect continues to be felt when the
future prices, agreed upon pursuant thereto,
are implemented. It is
therefore not proper to read the allegations in paragraph 93.3 of the
affidavit in support of the complaint
referral as if they related to
conduct which in terms of time has already ceased to exist.’
[82]
If a theoretical foundation is
required for treating the conclusion and performance of the resultant
contracts as part of the prohibited
conduct, it can be found, we
think, in the duty to act or speak. Customers are entitled to deal
with their suppliers on the assumption
that the latter have not
colluded to fix prices. A colluding supplier who concludes a contract
with an unsuspecting customer at
a fixed price is withholding
information which would be of importance to the customer, namely that
the price has not been arrived
at through independent competition.
For as long as the suppliers give effect to the contracts with their
customers without disclosing
the true facts to the latter, they are
by their conduct and silence continuing to collude. The prior illicit
collusive arrangement
between the firms gives rise to an ongoing duty
to speak or act so that affected persons may reassess their position.
The way in
which the prohibited act in our example would cease would
be for one or both of the colluding firms to notify the customers
that
the prices in their contracts were collusively fixed and to
invite the customers to renegotiate the contracts on the basis that

the suppliers will now act independently rather than cooperatively.
In other words, unless the colluding firms ‘come clean’

during the course of the resultant commercial dealings with their
customers, the prohibited practice continues until those commercial

dealings come to an end and the firms who formerly colluded start to
deal with their customers independently.
[83]
In the present case, the initiating
conduct of the colluding firms was their agreement to rig the
auction, thus depriving Amplats
of prices which would be the outcome
of independent competition among the suppliers. They succeeded in
thwarting Amplats, although
they did not succeed in getting their
rigged prices. When Amplats came to negotiate with each of the firms,
Amplats was doing so
under the misapprehension that an honest auction
had not achieved the desired outcome. None of the four firms, in
their individual
negotiations with Amplats, disabused Amplats of that
misapprehension. Instead, they negotiated individual contracts in
which they
more or less kept their existing business at prices at or
near pre-existing levels. These individual contracts would have been
struck in about mid-2005, following the failure of the auction. There
was no evidence that the resultant contracts, which in this
industry
tended to be evergreen contracts of indefinite duration but
terminable on notice, were not still in force in January 2006.

Certainly Amplats did not engage in any further tender or auction
process prior to the cut-off date.
[84]
Each of the colluding firms, in
reaching its supply agreement with Amplats and in giving effect to
that supply agreement during
2005 and 2006, knew that it, like its
fellow colluders, was reaping the benefit of a contract which might
have been on less favourable
terms had Amplats not been duped. There
was a duty on each of the firms, if they were to act honestly, to
inform Amplats of the
true state of affairs. That would have enabled
Amplats to launch a fresh reverse auction on the basis that the four
firms would
now bid independently and not collusively.
[85]
The Tribunal was thus right to find
that the prohibited conduct initiated by the 2005 Amplats collusion
had not been shown to have
ceased by 26 January 2006.
[86]
In Videx’s heads of argument
counsel submitted that the Tribunal had erred because the
negotiations which occurred after the
failed auction were not part of
the conduct complained of in the referral. In oral argument, however,
Mr Butler did not, as we
understand him, contest in principle the
contrary reasoning we have set out above. He accepted that the
prohibited conduct had
not ceased merely because the auction failed
and because Amplats then negotiated with the firms individually. His
contention in
oral argument was that, at least in the case of Videx,
the individual negotiations with Amplats resulted in competitive
prices
and were prices below which Videx would probably not have gone
in an independent auction process, and that this made all the
difference.
[87]
We reject this contention. It is
rather too easy for a colluding firm to say, once it has thwarted an
independent auction, that
the price subsequently agreed with the
customer was in any event a competitive price which was not higher
than the price which
the supplier would have bid at a genuine
auction. Amplats was entitled to the outcome of an independent
auction. Because of the
collusion between the four suppliers, we
simply do not know what an independent outcome would have been. We
know that on prior
occasions firms were willing to bid break-even
prices in order to retain or win critical volume. Even if a
particular firm was
not willing to go below a certain level in a
genuine auction, it cannot be known for certain that another firm
might not have done
so.
[88]
Furthermore, Videx’s argument
focuses on the allegedly competitive outcome of its individual
negotiations with Amplats. But
the collusion in this instance
involved four firms, and as a result of the collusion Amplats had to
negotiate individually with
each firm. Even if Videx’s
negotiated prices with Amplats were the lowest prices Videx could
offer (and even the lowest prices
that anyone else would have
offered, though we suspect that is unknowable), the same is unlikely
to be true for the other three
firms. RSC apparently retained its
business at pre-existing prices, and Henderson’s perception was
that this had been the
general outcome. For as long as Amplats was
kept under a misapprehension by the four colluding firms and for as
long as those firms
gave effect to the negotiated contracts which
Amplats had been compelled to conclude following the unsuccessful
auction, the prohibited
conduct constituted by the rigged bidding
continued. If any one of the firms had gone to Amplats and disclosed
the truth, Amplats
would have been entitled to terminate the
negotiated contracts on grounds of non-disclosure and to arrange a
new reverse auction.
[89]
The contention (which we did not
understand to be pressed) that the individual negotiations between
Amplats and the four colluding
firms were not themselves alleged in
the referral to be ‘tainted’ misses the point. It was for
Videx to show that the
prohibited conduct had ceased in the sense
explained earlier. The referral sufficiently alleged that the
collusion in the second
Amplats auction thwarted the auction. The
subsequent individual negotiations were inevitably ‘tainted’
because Amplats
had not wanted to engage in individual negotiations
but to conduct a reverse auction. Videx failed to show that the
effects of
the collusion were not still being felt after the cut-off
date.
[90]
We do not say that all ongoing
effects of prohibited conduct qualify as factors justifying a
conclusion that the prohibited conduct
has not ceased. Most types of
prohibited conduct distort the market. The distorting effects may
perhaps be felt even though the
colluding firms have ceased to behave
cooperatively. Competition theory would hold that, provided firms
compete independently,
distortions in the market from prior collusion
should correct themselves. What is important is that one should have
reached a point
where market outcomes are being determined by
independent competition. That is not the case for as long as
contracts which are
the outcome of collusion are being enforced.
[91]
If there was a continuing
understanding in 2004 and 2005, but if one were to conclude (contrary
to our view) that it came to an
end as a result of the distrust
engendered by the Harmony episode, the finding of the Tribunal
regarding the ongoing nature of
the 2005 Amplats collusion (a finding
we regard as correct) would, as previously mentioned, simultaneously
justify a finding that
the understanding   had ongoing
effects beyond 26 January 2006, even if only in relation to the act
of implementation
constituted by the 2005 Amplats collusion; ie if
the parties  participated in the continuing understanding during
2004 and
2005 until (say) the Harmony tender, then it had at least
some ongoing effect beyond the cut-off date (because the second
Amplats
auction, which was one of the manifestations of the
understanding, had ongoing effects beyond that date).
2006 and 2007
[92]
We have already foreshadowed our view
that the continuing understanding  did not terminate at the end
of 2005 but continued
through 2006 until at least February 2007. An
incident which attracted a good deal of attention in the Tribunal
proceedings was
the termination by RSC of its existing supply
contract with Anglo Coal in 2006 and the resultant issuing of a
tender by Anglo Coal.
We have explained that, because of Duraset’s
disruptive conduct, RSC had been compelled in mid-2005 to drop its
prices in
order to retain the Anglo Coal business. At the meeting of
14 November 2005 Koszewski had asked Bornman of Duraset not to seek
to increase its market share with Anglo Coal. However, RSC was under
internal pressure to improve its financial results and was
thus
anxious to achieve what it regarded as more sustainable prices with
Anglo Coal.
[93]
This led to meetings in the first
half of 2006 at which, according to the RSC witnesses, it was agreed
that RSC would give notice
to terminate its contract with Anglo Coal
and that the other firms would not attack RSC in the tender which
Anglo Coal would inevitably
then issue. The RSC witnesses went
further, stating that there was general agreement to respect each
other’s existing contract
customers, on the basis that, if any
other firm wished to follow RSC’s example by terminating an
existing contract in order
to achieve better prices on tender, the
remaining firms would not undercut the incumbent.
[94]
The case set out in this regard in
the Commission’s witness statements and in their subsequent
oral testimony went considerably
beyond what the Commission alleged
in its referral affidavit. In its referral affidavit, under a main
heading dealing with collusive
tendering in contravention of
s 4(1)(b) (iii), the Commission dealt with various specific
incidents. The Anglo Coal matter
was dealt with in paras 61 and 62,
where the Commission’s deponent merely said the following:
‘
61.  During
May 2006, RSC and Duraset also discussed the supply to Anglo Coal of
z-resin bolts.
62.  At that meeting,
RSC and Duraset discussed the prices at which they were going to bid
once Anglo Coal has issued
the tender. In particular, it was agreed
that they will not go in with low prices thereby undercutting each
other.’
[95]
It will be observed that this
allegation makes no reference to DSI or Videx. In its answering
affidavit DSI merely noted these two
paragraphs. In its answering
affidavit Videx also ‘noted’ these paragraphs, adding
that Videx was not a party to any
collusive activity in respect of
the Anglo Coal tender.
[96]
The referral was made in September
2009. DSI and Videx filed their answering affidavits in October 2009
and January 2010 respectively.
The Commission filed its witness
statements in mid-2011, and the trial got under way on 31 October
2011. The witness statements
were far more expansive regarding the
Anglo Coal incident. In the responding witness statements of DSI and
Videx, the witnesses
noted that the Commission’s referral
affidavit had not implicated them in the Anglo Coal matter but
nevertheless for the
avoidance of doubt stated their position (albeit
briefly) on the merits.
[97]
At the commencement of the Tribunal
hearing, and after the completion of the Commission’s counsel’s
opening address,
Mr Butler for Videx said that in relation to the
Anglo Coal incident one was not dealing with a broad allegation in
the referral
affidavit on which the witnesses were to elaborate;
instead, the Commission had in the referral affidavit committed
itself to specific
allegations and that Videx was not implicated
therein. He continued:
‘
Perhaps
for the moment we confirm that we’ve indicated to our learned
friends that we do not think that that issue is ripe
for hearing as a
point
in
limine
.
We submit that the proper approach is just to let the evidence flow
and for the parties to make their submissions in argument
to be [sic]
at the end of the matter, but we do just wish to place it on this
marker. At the commencement of this matter Nortons
on behalf of Videx
wrote a fairly detailed letter, which we will show you in due course,
pointing out essentially the complaint
that we have just outlined to
you now and that complaint was repeated later in this year.
The position taken by the
Commission is that they see the complaint and they do not intend
amending the referral. So, as it were,
they are content to make their
bed on the basis of the referral as it stands. They don’t
intend adjusting their position
and we for our part are happy for
this matter to be argued at the end of the hearing before you when
appropriate. So, we put [down]
this marker that the Commission has
committed itself to presenting its case on the basis of the referral
as it stands.’
Mr Cilliers for DSI associated himself with this
position.
[98]
In our view, the Tribunal should not
have permitted the matter to proceed on this basis. The Commission
quite clearly intended,
in regard to the Anglo Coal matter, to
present a case which went further than the referral affidavit and
which implicated DSI and
Videx. The Commission was ill-advised and
stubborn in declining to amend the referral. Videx and DSI, for their
part, were adopting
a tactical position in which they sought no
in
limine
ruling to
limit the evidence that could be led and subsequently raised no
objection to the ambit of the evidence in fact led, but
were
preserving to themselves a procedural argument in closing if it
should transpire that the evidence was against them. Neither
side
should have been allowed to take these stances. The Tribunal should
have required the Commission to articulate the case it
wished to
present in regard to Anglo Coal and should have required the
Commission, if such case did not accord with the pleadings
(as it
clearly would not), to bring an amendment application and to suffer
the consequences (such as a postponement) if there were
any.
Similarly, the Tribunal should have made it clear to Videx and DSI
that if they regarded any particular evidence as inadmissible
because
it was not covered by the pleadings they would need to object to it,
either generally in advance or as the evidence was
led. Had the
Tribunal followed this course, a lot of the subsequent procedural
wrangling would have been avoided.
[99]
However, because of the position
adopted by the litigants and because of the failure of the Tribunal
to take charge of the matter
at an early stage, the Commission
proceeded to elicit from all its witnesses wide-ranging evidence
concerning the Anglo Coal matter.
No objection was taken during the
questioning of those witnesses. They were fully cross-examined on the
matter. Indeed, one is
struck, reading the transcript, by how
prominent the Anglo Coal matter and ensuing events of 2006 and 2007
were in the leading
of the Commission’s witnesses and in their
cross-examination. This may have been because there was relatively
little dispute
about the instances of collusion in 2004 and 2005.
Another consideration in the mind of the Commission may have been the
importance
of establishing that collusion had continued beyond 26
January 2006. Whatever the explanation, our sense is that the larger
part
of the oral evidence of the Commission’s evidence in chief
and in cross-examination had to do with the events of 2006 and
2007,
including the Anglo Coal tender. DSI and Videx also led their
witnesses on the matter and they were fully cross-examined.
[100]
There is thus no doubt in our mind
that the Anglo Coal matter was fully canvassed in the evidence.
Although, in opposing the belated
amendment application, Videx and
DSI put up various examples of supposed procedural prejudice, we
regard them as fanciful. We do
not believe that the trial would have
unfolded in a materially different way if the Commission had from the
outset amended its
referral affidavit so as to bring its Anglo Coal
allegations broadly in line with the evidence it intended to lead.
[101]
We do not propose to determine
whether the Tribunal erred in refusing the amendment application. To
some extent, that question –
raised, as it was, at the end of
the whole trial – is rendered academic by the principles laid
down by the Constitutional
Court in
Senwes
supra.
In that
matter the Supreme Court of Appeal had found that the decision made
by the Tribunal was not open to it because the finding
in question
was not alleged in the referral. The Supreme Court of Appeal
interpreted s 52 of the Act as meaning that the referral

constituted the boundaries beyond which the Tribunal could not
legitimately travel and that in terms of s 55 the evidence
which
the Tribunal could receive was limited to matters set out in the
referral. In rejecting this view Jafta J, writing for the
majority,
said the following:
‘
[48]  The
fact that section 52(1) expressly states that the Tribunal must
conduct a hearing into every matter referred
to it does not
necessarily mean that the Tribunal has no power to entertain a matter
not included in the referral. This section
does not define the powers
of the Tribunal. Instead it deals with the procedure to be followed
when conducting a hearing. The section
is located in Chapter Five
which is concerned with the investigation and adjudication
procedures. In essence, section 52(1) obliges
the Tribunal to conduct
a hearing whenever a complaint is referred to it. It is clear from
the reading of the section as a whole
that the Tribunal cannot
initiate a hearing. But this does not mean that it cannot determine a
complaint brought to its attention
during the course of deciding a
referral.
[49]  While it is true
that the Tribunal can exercise only those powers given to it by the
Act, the flaw in the approach
adopted by the Supreme Court of Appeal,
in my respectful view, lies in the fact that it conflates matters of
jurisdiction and procedure.
As mentioned above, the Tribunal’s
jurisdiction to adjudicate contraventions of section 8 of the Act is
beyond question.
[50]  Accordingly, the
construction given to section 52(1) by the Supreme Court of Appeal is
at odds with the scheme of
the Act, including the structure of
section 52, when read in its entirety. This section gives the
Tribunal freedom to adopt any
form it considers proper for a
particular hearing, which may be formal or informal. Most
importantly, it also authorises the Tribunal
to adopt an
inquisitorial approach to a hearing. Confining a hearing to matters
raised in a referral would undermine an inquisitorial
inquiry.’
[102]
As a fact, and as a result of the
position adopted by the litigants, the Tribunal in this case heard
all the evidence relating to
the Anglo Coal matter. The case which
the Commission intended to present was set out in witness statements.
A case of collusion
in violation of s 4(1)(b) was referred to
the Tribunal, and the Tribunal had jurisdiction to determine such a
complaint. Unlike
the position in
Senwes
,
there were not even objections to the evidence that was led. As we
have said, the evidence on the Anglo Coal matter formed a large
part
of the testimony before the Tribunal. There was to our mind no
procedural unfairness in allowing the Anglo Coal matter to
feature as
one of the acts of collusion in which Videx and DSI were alleged to
have been involved.
[103]
The Tribunal in the present case
recognised that this course was, in the light of
Senwes
,
potentially open to it. The Tribunal correctly found that there was
no procedural prejudice to DSI and Videx in relation to the
leading
and cross-examining of witnesses. The Tribunal considered, however,
that it would not be fair to allow the Commission to
press the Anglo
Coal complaint against Videx and DSI because the version from the
Commission’s witnesses did not make out
a consistent and
coherent case.
[104]
Whether the case made out by the
evidence was ‘consistent’ or ‘coherent’ is a
matter to which we shall turn
shortly. we must say, though, that we
find the Tribunal’s reasoning somewhat circular. In order to
determine whether the
case is consistent or coherent one needs to
analyse the evidence fairly and holistically. Once one has done that,
one can determine
whether the complaint has or has not been made out
on its merits. A complaint which lacks inconsistency and coherence is
unlikely
to succeed on its merits. Once one has undertaken a full
analysis of the evidence on a particular matter, one has effectively
done
what
Senwes
says the Tribunal is entitled to do,
namely investigate a complaint which has been fully canvassed before
the Tribunal, even though
the complaint was not alleged in the
referral affidavit.
Senwes
is not concerned
with whether the outcome of the adjudication of such evidence is
favourable or unfavourable to a particular litigant
but with whether
the exercise can permissibly be undertaken by the Tribunal at all
with a view to making a finding one way or the
other.
[105]
We thus consider that the evidence
regarding the Anglo Coal matter and the other evidence concerning the
events of 2006 and 2007
could permissibly be investigated by the
Tribunal, even though it travelled beyond the referral affidavit. In
our view, moreover,
the evidence, fairly assessed, established that
there was collusion between the four firms on the Anglo Coal matter
and that this
involved a perpetuation of the overarching
understanding . The fact that the versions of the various witnesses
were not entirely
consistent with each other does not mean that one
cannot reach a reliable conclusion. The witnesses were testifying
about events
which had occurred more than five years previously. They
were not still in the employ of the relevant firms and did not have
access
to records beyond those which were discovered. Uncertainty
about precise dates is no cause for surprise. We record here that the

evidence of the Commission’s witnesses reads well. Because they
were no longer employed by RSC or Duraset, they had no motive
to
exaggerate the case against Videx and DSI.
[106]
In our respectful view, the Tribunal
made somewhat heavy weather of the evidence relating to Anglo Coal.
By the end of the trial
the picture was to our mind relatively clear.
we have already alluded to the meeting of 14 November 2005 where
Koszewski of RSC
had urged Duraset not to attack RSC’s Anglo
Coal business and had threatened retaliation if Duraset did not back
off. Everyone
was agreed that in the first half of 2006 a meeting was
held, attended by representatives of all four firms, at which RSC’s

contract with Anglo Coal was again discussed. The essence of the
discussion, according to the Commission’s witnesses, was
that
RSC, which regarded the prices in its existing Anglo Coal contract as
unsustainably low, wished to terminate the Anglo Coal
contract, with
a view to offering higher prices when Anglo Coal went out to tender.
However, RSC was not willing to risk this gambit
if it was going to
get into a bidding war with the other firms.
[107]
The timing of this meeting was
regarded as important in the Tribunal proceedings, having regard to
the significance of the cut-off
date of 26 January 2006. In the
event, and as we shall explain in due course, we do not think it
matters whether the meeting took
place before or after 26 January
2006. The evidence does not enable one to determine the date with
precision. However, the evidence
as a whole shows that the meeting
must have taken place during January or February 2006; the date of
May 2006, alleged in the Commission’s
referral affidavit,
cannot be correct. In their witness statements Koszewski and
Henderson placed the meeting in February 2006.
Bornman in his witness
statement said that the meeting was in May 2006 but he explained in
oral evidence that he had estimated
this date with reference to the
date when Anglo Coal issued its tender. As the evidence as a whole
reveals, the meeting must have
taken place several months before the
issuing of the new tender.
[108]
Contemporaneous documents permit one
to fix certain dates. Representatives of RSC and Anglo Coal met on 16
January 2006 in order
to discuss RSC’s claim for relief under a
hardship clause in the supply contract. This was followed by a formal
claim for
hardship relief addressed by RSC to Anglo Coal on 23
January 2006.
[44]
It is self-evident that this letter
is not itself a notice of termination; if Anglo Coal had afforded RSC
the requested relief,
RSC would presumably have continued with the
contract.
[109]
On 1 March 2006 there was a further
meeting between RSC and Anglo Coal. The meeting of this date is
mentioned in a letter which
Anglo Coal addressed to RSC on 3 April
2006, in which it was confirmed that the supply contract would be
deemed to terminate on
30 June 2006.
[45]
If there was a written notice by RSC
to Anglo Coal terminating the supply contract (as Koszewski in his
evidence thought to be the
case), it was not adduced as an exhibit.
It seems more probable that Koszewski was confusing the claim for
hardship relief with
the termination notice. What seems to have
happened is that, subsequent to RSC submitting its claim for hardship
relief, the parties
met and that, when Anglo Coal declined to grant
relief, RSC informed Anglo Coal that it wished to terminate this
supply agreement
on notice. This was probably discussed orally on 1
March 2006 and confirmed in writing by Anglo Coal on 3 April 2006.
The termination
date of 30 June 2006 mentioned in Anglo Coal’s
letter was four months as from 1 March 2006, which accorded with
Koszewski’s
recollection that the supply agreement was
terminated on four months’ notice.
[110]
One can thus say with some confidence
that the meeting between the four firms took place prior to 1 March
2006, probably during
February 2006. It seems less likely that the
meeting took place prior to 26 January 2006, because RSC only
submitted its hardship
claim on 23 January 2006. However, to our mind
it would not matter whether the meeting took place before or after 26
January 2006.
[111]
The consistent evidence of Koszewski,
Henderson and Cawood was that RSC would under no circumstances have
risked terminating the
Anglo Coal contract unless it was confident of
re-winning it on tender. It is common cause that a meeting to discuss
a proposed
termination of the contract took place at which all four
firms were represented. It is also clear from the evidence that RSC
did
proceed to terminate the contract. Anglo Coal then on 23 May 2006
issued a tender for the same business (involving four of its six

collieries, those being the four collieries which RSC historically
had supplied – DSI and Duraset each had a separate supply

agreement with Anglo Coal in respect of its other two collieries). It
is common cause that pursuant to that tender RSC retained
the
business at higher prices. Koszewski and Henderson said that the
higher prices could be seen in RSC’s significantly improved

financial results. These objective facts render it inherently
plausible that at the meeting in January/February 2006 RSC received

comfort from the other firms that if RSC terminated the Anglo Coal
contract the others would not attack that business in the ensuing

tender.
[112]
It is plain that RSC viewed Duraset
as the main risk in its Anglo Coal business. This had been the
subject of discussion on 14 November
2005. Duraset had always been
the least reliable member of the cartel. The meeting in
January/February 2006 was attended by Henderson,
Koszewski, Smit,
Bornman, Henson, Josef and Le Roux. Koszewski thought it took place
at a venue opposite Eastgate Shopping Mall;
Henderson and Bornman
said it was held at RSC’s premises. It appears that there were
several meetings between the firms in
the first half of 2006. One or
other of these witnesses may have been confused as to the venue of
the Anglo Coal meeting.
[113]
Be that as it may, Henderson
described the meeting as highly significant:
[46]
‘
Well,
the whole thing was the stability in the market and there had been a
lot of mistrust going on in the 2004/2005 period where
the cartel
wasn’t always trustful to the parties. So, the 2006 meeting
early that year with Anglo Coal was really to…
I don’t
think it’s ever happened in the history of roof bolts that a
company would give notice to a mining house on
their business. So, it
was a watershed as far as getting the parties together to agree that
we wouldn’t be challenged when
the new tender came out. We
would raise our prices and the other parties would respect those
prices and tender at higher prices.
But more importantly what was
agreed was that after that period of time, whatever market those four
companies were supplying, we
would respect them. We wouldn’t go
and attack other people’s markets. So, it allowed each company
to go and increase
their prices where they felt they had to do
without being threatened by one of the other companies attacking
them. I think that’s
the most important feature of that, other
than the Anglo Coal contract.’
Later he said:
[47]
‘
In
fact, if I remember, handshakes were done by the parties at one of
those meetings, which I think was very unusual. So, it unified
some
sort of trust amongst the players at that stage. Whether it was that
particular meeting [February 2006] or one subsequent
to it, but at
that point in time it was probably the highest level of trust between
the cartel that I’ve ever experienced.’
Henderson remained firm on this description of the
meeting and was adamant that RSC would not have terminated the Anglo
Coal contract
without an assurance from the other firms that they
would not attack the business. Duraset and DSI would provide cover
bids and
Videx indicated that it would not tender at all. He also
testified that following the meeting he briefed his sales force
regarding
the outcome of the meeting.
[114]
Henderson testified that when the
Anglo Coal tender was subsequently issued in May 2006, he had
telephonic discussions with DSI
and Duraset and gave them cover
prices. He said that they indicated to him that they would bid at
those prices. He remembered that
they had been a little bit
uncomfortable about bidding these cover prices, given that they had
other business with Anglo Coal at
lower prices. He said that both DSI
and Duraset must have bid higher prices than RSC (if they bid at
all), otherwise RSC would
not have retained the business. He did not
recall talking to Videx because they were not really in the market
for supplying resin
roof bolts. His understanding from the meeting
was that Videx was not going to submit a tender. (In the event Videx
did submit
a bid, though a non-compliant one.)
[115]
Koszewski’s evidence was to
similar effect. RSC would not have risked giving notice if it did not
have the support of the
other firms. He said that the other firms
agreed to provide cover bids in the anticipated Anglo Coal tender. He
viewed the Anglo
Coal termination and tender as a ‘pilot
project’ which the other firms could implement on their own
contracts in due
course if necessary. He said that the firms
discussed at the meeting that an appropriate ‘contribution
margin’ would
be 30%, aimed at ensuring a reasonable 8% EBIT.
(RSC’s existing price with Anglo Coal only allowed a 10%
contribution margin.)
The idea was not to profiteer but to get
reasonable prices. He said that trust was re-established at the
meeting and that Videx
was supportive of RSC. He was categoric and
uncompromising when asked by the Commission’s counsel to
comment on the version
put up by DSI and Videx:
‘
ADV
MOTAU:  What do you say about that version by the
respondents to the effect that at best or at worst their conduct
only
went up to January 2006 and not beyond that?
MR KOSZEWSKI: In terms of
what learned counsel had mentioned, they are acting on the
instructions and advice of their clients.
So, I can’t comment
on that and I’m not going to comment on that, but in terms of
the respondents themselves, they
are perjuring themselves.
MR MOTAU:  Why do you
say that?
MR
KOSZEWSKI: Because factually these people from the respondents
were at meetings that related to what is being recorded in
para 11 at
page 137,
[48]
from 2006
onwards.
ADV MOTAU: In other words, from
February 2006 onwards?
MR KOSZEWSKI:  Correct.’
[116]
Koszewski only became personally
involved in the industry meetings as from early 2006. He said that by
the time he got involved
in the meetings the entire customer base had
largely been rolled out into four equitable shares. There was a
‘healthy respect’
for the allocation of the customer
base. When there were transgressions they were raised, discussed and
resolved at meetings –
he was referring to meetings in the
period after February 2006.
[49]
In cross-examination by DSI’s
counsel he was questioned about his lack of particularity regarding
the meetings. He replied
as follows:
[50]
‘
MR
KOSZEWSKI: I think you’re focusing on a period outside of
my direct involvement and in respect of the period where
I did have
direct involvement. And in respect of the period where I did have
direct involvement, I have given the evidence that
I am able to with
regard to the pilot project and what the outcome of that was in terms
of the financial benefits that accrued
to [RSC] and also what
generally was discussed at the meetings. Now this wasn’t
minuted, formal notes weren’t kept,
but what I can only tell
you what I am able to. I am not going to try and contrive anything.
ADV CILLIERS:  I
understand.
MR KOSZEWSKI: It is not where or
who I am, I am not going to try and do that.
ADV CILLIERS: I understand,
so when you didn’t particularise meetings about market
allocation in 2007 it’s because
you couldn’t
particularise them?
MR KOSZEWSKI: That is not
correct. That is not what I am saying. I am saying that there was an
allocation of the market between
the four respondents and that which
we had respected, because what was discussed at the meetings, among
other subjects, was to
ensure that there wasn’t or that those
market shares had been respected okay, that that was respected and
also to ensure
that there was a roll out of the prices, otherwise
where would the trust be? There wouldn’t be any remaining
trust.
ADV CILLIERS: There wasn’t
much trust was there?
MR KOSZEWSKI: There was trust,
of course there was trust.
MR CILLIERS: Was there?
MR KOSZEWSKI: In terms of having
allowed RSC to obtain the Anglo Coal contract at what we believed was
a fair price and the rolling
out of prices to the other customers
within the four respondents’ customer base that took place and
it took place as a result
of the trust that had been developed.’
[117]
Although Cawood was not present at
the meeting, it is apparent from his evidence that he received
feedback from Koszewski and Henderson.
We have already referred to
Cawood’s evidence concerning the frequent interactions between
the firms on non-contract customers.
When asked about the period over
which these interactions to place, he said:
[51]
‘
It
dates back from 2005, after the Anglo Platinum tender and from the
Anglo Platinum tender onwards there was almost a trust relationship

between the various participants and by feeling and testing the water
on the smaller day-to-day issues, the trust was built up
to the major
big contracts and one of the main contract – although I was not
involved with it, but the Anglo Coal contract
– that was
definitely done on a 100% almost guaranteed basis that it will go
according to plan, but the trust was determined
by the day-to-day
purchases.’
[118]
The Tribunal appears to have thought
(para 106) that Bornman’s evidence was destructive of the
proposed amendment which the
Commission wished to introduce. We are
not sure we entirely follow the difficulty which the Tribunal had but
in any event we prefer
to put the proposed amendment (which the
Tribunal refused) to one side and rather to assess, as
Senwes
permits, the
purport of the evidence as a whole. We have already explained why
Bornman’s evidence as to the timing of the
meeting (May 2006)
was an understandable error. As to the content of the discussion, he
did not express Duraset’s position
in quite the unequivocal
terms that Koszewski and Henderson did. He said that while Duraset
did not want to collude or profiteer,
it recognised that a war of
attrition was unsustainable. He confirmed that Duraset was asked not
to upset the market, and that
the specific focus of the discussion
was RSC’s Anglo Coal contract. He said that Duraset was, at the
time of this meeting,
disenchanted with Anglo Coal because the latter
had declined to award Duraset the business in mid-2005 despite the
very low prices
offered by Duraset. He had no desire to help Anglo
Coal erode market value.
[119]
He thus told those present that if
Anglo Coal went out to tender, Duraset would not go in with ‘silly
prices’ again.
Duraset would not tender prices below what it
believed to be reasonable market value. However, he added a
significant perspective
during cross-examination. He said that he
knew, when Duraset subsequently tendered for the Anglo Coal contract,
that if RSC reverted
to the prices it had been charging prior to the
mid-2005 price war with Duraset, RSC would win the tender.
[52]
A short while later the following
exchange took place between DSI’s counsel, Bornman and the
Tribunal’s chairperson:
[53]
‘
MR
BORNMAN: This was a meeting where things were discussed, lots of
things were discussed, people got heated and all sorts of things,
but
the upcoming tender was discussed and what’s happening in the
industry and so on and then I said well our position is
that we are
not going to go in with these low prices again, we will go in,
because we’re not interested, I think I used the
words that we
are not interested in the Anglo Coal contract any more.
ADV CILLIERS:  But you
don’t tell them what you going in, that’s your business?
MR BORNMAN:  No.
ADV CILLIERS: Right, so…
CHAIRPERSON:  Did you say
to them that you weren’t interested in the Anglo Coal contract?
MR BORNMAN:  I can’t,
look I was, and this is a long time ago. All I know is the emotions I
can remember that, that
we were upset as a company that we had gone
in, we had offered them [Anglo Coal] low prices, they used us to
drive down the prices
with the incumbents [RSC] and then I said well
you know if this is the game that they [Anglo Coal] are going to play
I am not going
to assist them with the game, I am not going or we as
a company are not aggressively going to compete for this contract,
that’s
what we said. Does that answer your question?
CHAIRPERSON:  What
would RSC have understood from what you said at the meeting?
MR BORNMAN:  They
would have understood that they could go back to the old prices.’
[120]
Earlier in his evidence in chief,
Bornman summarised the significance of the meeting in a manner which
resonates with Henderson’s
‘watershed’
description:
[54]
‘
MR
BORNMAN:  I can remember a general feeling of now we’ve
[Duraset] come to the party, but I can’t remember
exactly who
said what, when and how. If there was an agreement reached between
the other parties, that I can’t remember…
People were
tense in those meetings. It was very confrontational.
ADV MOTAU:  Yes?
MR BORNMAN:  And I got the
impression that they sort of heaved a sigh of relief.
ADV MOTAU:  They what?
MR BORNMAN:  There was
relief. It was body language. It was not words. It was not…
ADV MOTAU:  It was not
something that was expressed. You are just saying it was the body
language.
MR BORNMAN:  Yes,
people smiled and were happier and so forth, you know. The tension
went out of the room.
ADV MOTAU:  Why?
MR BORNMAN:  Because
we had stopped being aggressive on this issue, on the Anglo Coal
tender, because we had informed
them that we will not attack them
again with silly prices.’
[121]
Videx’s submission that Bornman
was ‘insistent that no agreement was reached at the meeting’
overlooks these aspects
of his testimony, which must naturally be
assessed in its totality. Having regard to the evidence of Koszewski,
Henderson and Cawood
and to the objective facts, we consider as a
matter of probability that Bornman’s participation in the
meeting was such as
to convey to RSC’s representatives (and to
DSI and Videx) that RSC could terminate the Anglo Coal contract,
confident in
the knowledge that it could revert to the earlier higher
prices, and that Duraset would tender prices which would enable RSC
to
retain the business.
[122]
In its submissions Videx made
reference to Smit’s witness statement. Smit was not called as a
witness and little if any significance
can thus be attached to his
statement. Although he was present at the Anglo Coal meeting, he did
not deal with it in his statement.
It would not be appropriate to
speculate as to what he would have said if called.
[123]
DSI and Videx both ran the line that
they were not really involved in the discussion because they were not
viewed as serious contenders
for that part of the Anglo Coal business
which had historically been held by RSC. However, on the evidence of
Koszewski and Henderson
there was more to the meeting than just the
Anglo Coal contract. RSC wished to protect its own position in the
Anglo Coal contract
by offering the other firms similar cooperation
if they wished in the future to follow a similar course. As an
objective fact,
both DSI and Videx were invited to attend the
meeting. If RSC thought it only needed to talk with Duraset, there
would have been
no need to invite the others. DSI and Videx did not
say that they attended the meeting under a misapprehension as to what
was to
be discussed. Le Roux testified that he did not know what the
meeting was going to be about. Given the history of collusive
meetings
among the firms, we find it difficult to accept that he
thought the meeting had a legitimate purpose. He certainly did not in
evidence
say what else he thought was going to be discussed. The
representatives of DSI and Videx stayed for the duration of the
meeting.
Even if Koszewski and Henderson could not, at a distance of
five years, remember precisely what had been said, they were clear
that the representatives of DSI and Videx did not do or say anything
to indicate that they were not in agreement with what RSC was

proposing. Although Mr Butler in cross-examination put to Koszewski
and Henderson that, in the light of the loss of trust caused
by the
Harmony incident, Le Roux would have had every reason to have said
‘no’ to RSC’s proposal, the fact is
that even on
his own version Le Roux did not say ‘no’; somewhat
implausibly he claims to have said nothing at all,
and certainly did
not testify that he expressly rejected RSC’s proposal.
[124]
Even though Duraset may have been
viewed by RSC as the main threat to the Anglo Coal business, RSC
could not know for certain that
DSI and Videx might not prove to be a
disruptive force. RSC’s representatives would also not have
known the precise capacity
constraints of DSI and Videx or what
ability those firms might have to procure product. If Josef and Le
Roux wanted nothing more
to do with collusive arrangements following
RSC’s cheating in the Harmony tender, they would have declined
to attend the
meeting or would have walked out when they realised
what was under discussion. Yet they did not do so. Josef did not
testify. Le
Roux portrayed himself as a passive bystander; he did not
claim to have displayed anger or annoyance with RSC or to have said
or
done anything to show disagreement with the RSC proposals.
[125]
Henson’s evidence was that
Koszewski had sought assurances from the three other firms and wanted
their cooperation. Henson
claimed to have told the other
representatives that DSI did not intend to give notice to Anglo Coal
in respect of the one colliery
which DSI supplied. However, and
although he testified that he had not agreed at the meeting to
support RSC, he did not claim to
have done or said anything to
indicate that he would compete for the business which RSC currently
had with Anglo Coal.
[55]
It is also revealing that, when asked
in chief about Henderson’s evidence to the effect that he
(Henderson) had later phoned
Henson to give him the prices which RSC
intended to bid, Henson did not positively deny that the call had
been made. He said: ‘Whether
[Henderson] did or not I’m
not in a position to say, but I mean I wasn’t going to…
it wasn’t a DSI matter
anyway. So, I mean, that phone call,
even if it was made and I cannot recall it, was of no consequence or
of no import.’
[56]
[126]
In the event, Videx submitted a
tender for the Anglo Coal contract, a tender which did not have the
result of preventing RSC from
retaining the business. (According to
Le Roux, Videx did not offer the product specified in the tender but
a substitute. He said
that Videx did not expect to win the tender but
wished to remain on Anglo Coal’s tender list.)
[127]
DSI’s counsel put to Henderson
in cross-examination that DSI/Mandirk had not responded to the
tender.
[57]
However, when DSI’s counsel led
Henson he did so on the basis that DSI/Mandirk had indeed submitted a
bid, which Henson confirmed.
[58]
When DSI’s counsel asked Henson
whether Koszewski was right in inferring that DSI/Mandirk had
deliberately provided a cover
price for RSC, his response was that he
could not really comment on whether or not there was truth in
Koszewski’s statement.
[59]
The fact that DSI submitted a bid is
important, because it seems unlikely that RSC would have won the
business unless its price
was the lowest. We know from Henson’s
evidence that DSI’s price to Anglo Coal’s Kriel colliery
(which was not
the subject of the tender) was considerably lower than
the price at which RSC won the Anglo Coal tender of May 2006.
[60]
This tends to support a conclusion
that DSI provided a cover bid for RSC in the latter tender.
[128]
One can test the matter by asking
what would have transpired if, at the meeting, Josef and Le Roux had
told the other firms that
Videx had no intention of participating in
any collusive arrangements and would be competing independently for
all business. From
the evidence of the Commission’s witnesses
it is clear that, in the face of such an attitude from Videx, RSC
would have reassessed
its position and may well not have terminated
the Anglo Coal contract. This would not necessarily have been because
of the threat
Videx would have posed in the ensuing Anglo Coal tender
(though we do think that this can altogether be discounted) but
because
the Anglo Coal understanding rested on a broader acceptance
by all four firms that they would not be attacking each other’s

established customers. If Videx had firmly distanced itself from all
future collusion, Duraset and DSI would probably have reacted

differently to RSC’s proposals, and RSC in any event could have
had less confidence that Duraset and DSI would adhere to
their
undertakings if Videx was a rogue player.
[129]
It is also not without significance,
in our view, that it was around the time of the Anglo Coal meeting
that, following communication
between DSI and Videx, the latter
terminated its agreement with Goldfields for the supply of shepherds
crooks (business Videx had
obtained in the collusive Goldfields
online reverse auction of October 2004). As a result, Goldfields
issued a tender during March
2006. DSI then regained its
‘traditional’ business with Goldfields, evidently without
competition from Videx and after
discussion between DSI and
Steeledale/Duraset in which the latter agreed to ‘respect’
DSI’s proposed pricing
in the forthcoming tender.
[130]
In our opinion, the evidence
concerning the Anglo Coal matter, even viewed as an
ad
hoc
occurrence,
constituted prohibited collusion in which all four firms
participated. Whatever the private intentions of the parties
may have
been, the understanding reached was that none of the other firms
would attack RSC if it terminated the Anglo Coal contract
and the
business was put out to tender. The four firms were competitors in a
horizontal relationship. The fact that Videx may not
have been seen
as a real threat to the Anglo Coal business, and that its buy-in to
the arrangement specifically on Anglo Coal was
thus less significant
than that of Duraset or DSI, does not mean that it was not a party to
the collusive arrangement.
[131]
In any event, we do not accept that
the understanding reached at the meeting was confined to the Anglo
Coal contract. RSC could
hardly have expected to obtain cooperation
from the other three firms unless there was a broader arrangement
from which they could
all benefit. That broader understanding,  in
keeping with the earlier history, was that they would respect each
other’s
traditional business and that any firm which chose to
follow RSC’s suit would not find itself under attack from the
others.
[132]
It appears that in the event there
may not have been any instances where the other firms followed the
route of terminating supply
contracts. This might have been because
during 2006 their contracts were generally at prices they found
acceptable. After Duraset’s
formal withdrawal from the
collusive arrangement in February 2007, the other three firms could
probably no longer give effect to
the broader understanding, because
they could not be sure that upon termination of a supply contract
they would not be attacked
by Duraset. There was also evidence that
there were significant steel price increases in 2007 and 2008 which
meant that prices
on supply contracts were in any event being
significantly adjusted. The market conditions were at that time not
conducive to tactical
terminations.
[133]
On the other hand, the evidence
indicates that there were further collusive meetings in 2006, and
according to Cawood the non-attack
understanding continued to be
monitored in relation to non-contract customers up to the time he
left RSC in August 2007. Henson
admitted that the firms continued to
meet in 2006 to discuss market sharing though he persisted with his
claim that nothing came
of these discussions.
[61]
[134]
The fact that there was an ongoing
cartel finds support in the fact that Duraset took the step of
formally withdrawing from it in
February 2007. Bornman explained
that, following the Anglo Coal meeting, his understanding was that
Duraset would not try to get
market share by ‘eroding margins
dramatically’ whereas Smit would privately tell him to ‘keep
on attacking with
low prices’. This put Bornman in a very
difficult position because, as marketing director, he was responsible
for sales.
[62]
This came to a head at the Duraset
strategic planning meeting in February 2007 where the pros and cons
of cooperation were put to
the other directors by Bornman and Smit
and where the decision to terminate all contact with the other firms
was taken.
[135]
According to Henderson, the
withdrawal decision was announced at a meeting where all four firms
were represented. He testified that
after this announcement,
interaction continued between RSC, DSI and Videx but that by
agreement only the managing directors or
general managers
communicated (ie at a level above him).
[63]
The remaining three firms still
respected each other’s markets. When asked in cross-examination
what he meant by ‘respected’,
he replied: ‘Well,
the same terms as before when RSC wouldn’t go and attack Videx
or wouldn’t attack DSI, because
we didn’t have a problem
with those two. It was Duraset that walked out and said they didn’t
want any part of it.’
[64]
[136]
Cawood testified that towards the end
of 2007 the RSC executives were instructed by the managing director,
Mr Noonan, to stop all
communications with other firms which were not
of an arm’s length nature.
[65]
[137]
As to Le Roux’s portrayal of
Videx as a passive bystander in the Anglo Coal discussions (he
claimed, somewhat implausibly,
to have said absolutely nothing at the
meeting), we refer to what this court recently said in the
MacNeil
case at paras
58-65. Generally a firm which is present at collusive discussions has
a duty to distance itself from those discussions
by a firm rebuttal.
Videx was invited to the meeting for a purpose, and on the
probabilities its representatives’ conduct,
whether through
words or silence, conveyed to the others that it went along with the
proposals. It must also be remembered that
during 2004 and 2005 Videx
had been a willing participant in collusive meetings. There were
times when DSI and Duraset were on
the outside but Videx, with Josef
and Le Roux at the helm, appears always to have been willing to
cooperate. Despite Videx’s
disenchantment with RSC’s
conduct in the Harmony tender, it is inherently plausible that Videx
continued to realise the advantages
of cooperation and stability in
the market.
[138]
These conclusions treat the Anglo
Coal incident as a self-contained prohibited practice. However, we
have already concluded that
there was an overarching understanding
during 2004 and 2005 which fell within the scope of
‘agreement’
in terms of s 1 of the Act.
That  agreement had not been terminated by any of the firms as
at the end of 2005.
If this finding is correct, we consider the Anglo
Coal discussions to have been a further implementation of that
understanding.
Although the cartel agreement had not been terminated,
trust had been impaired and Duraset’s conduct was problematic.
The
discussions which took place in the context of the Anglo Coal
contract re-established trust and affirmed the understanding which
in
our view had already been in place by the second quarter of 2004,
namely that of retaining a roughly equal split of the market
between
the four firms on the basis that other firms’ traditional
customers would not be attacked with low prices. In implementation
of
this understanding, which was re-affirmed, certain details were also
agreed in regard specifically to the anticipated Anglo
Coal tender,
on the understanding that similar details would apply if other firms
also wished to terminate supply contracts and
re-tender at more
sustainable prices.
[139]
We think it will be apparent by now
why, in relation to prescription (s 67(1)), it does not much
matter whether the meeting
at which the Anglo Coal contract was
discussed took place before or after 26 January 2006. Even if the
meeting took place before
the cut-off date, the understanding reached
at that meeting was implemented after that date, when RSC terminated
the Anglo Coal
contract and when the parties thereafter, in response
to the Anglo Coal tender, either refrained from bidding or submitted
bids
which ensured that RSC could retain the Anglo Coal business at
higher prices.
[140]
Moreover, the overarching
understanding continued through this period as is evidenced by the
repetitive collaboration between the
parties. If  it is correct
that the 2005 Amplats incident was a manifestation of this
relationship with continuing effects
beyond the cut-off date, none of
the manifestations of the overarching understanding were time-barred,
because the prohibited conduct
in relation to which s 67(1) had
to be considered was the overarching understanding rather than each
act of implementation.
It matters not, on this basis, that particular
acts of implementation in execution of the overarching understanding
may not have
had effects beyond the cut-off date.
Conclusion on the merits
[141]
For the reasons explained above, we
consider that the Tribunal should have found that there was an
agreement in the form of a continuing
understanding between the four
firms, which existed from (at least) the second quarter of 2004 until
February 2007 and of which
each of the individual incidents we have
discussed were manifestations.
Remedy
[142]
It will be apparent that our
conclusion on the merits requires a reconsideration of the penalty
imposed on Videx. The material in
the appeal record does not enable
us to determine an appropriate penalty in accordance with the
guidelines laid down by the Tribunal
in
Competition
Commission v Aveng (Africa) Ltd & others
[2012]
ZACT 32
, guidelines which this court said in
MacNeil
had been
permissibly adopted by the Tribunal. Furthermore, neither side made
submissions as to how an appropriate penalty should
be computed if we
were to find that there was an overarching agreement which rendered
all the incidents of collusion justiciable.
The Commission’s
counsel’s heads of argument concluded with the unhelpful
request that a penalty be imposed of 10%
of Videx’s annual
turnover for the preceding financial year, ie the maximum penalty
permitted by s 59(1)(a). Although
that request mirrored the
Commission’s prayer in the notice of referral, it ignores the
Tribunal’s guidelines in
Aveng
.
Although Videx made submissions on penalty which distinguished
between various products supplied by it, those submissions were
made
specifically with reference to the second Amplats auction. It would
not be appropriate at this stage to express a view on
the merits of
those submissions, though arguments of that kind, as applied to the
broader finding we have made, may need to be
considered in due
course.
[143]
It will thus be necessary for further
argument and perhaps further evidence to be adduced. A question
arises as to whether the question
of the penalty should be dealt with
in this court or whether we should remit the matter to the Tribunal.
We did not receive argument
as to what procedure would be
appropriate.
[144]
In our view, therefore, justice
requires that the parties should be requested to make written
submissions to this court as to the
course to be followed. Those
submissions should deal
inter
alia
with the
question whether the matter should be remitted; with the nature and
extent of the further evidence which might  need
to be adduced;
and with the manner in which such evidence should be adduced. The
parties are encouraged to engage with each other
with a view to
reaching agreement on the further conduct of the matter.
[145]
Of course, it is possible that, in
engaging with each other on procedural matters, the parties might
even reach consensus as to
an appropriate penalty, subject to
confirmation by the Tribunal or by this court. We should mention, in
that regard, that one of
the matters which this court or the Tribunal
might need to consider, in the determination of an appropriate
penalty, is that the
Commission failed to pursue against DSI the
cross-appeal on which it has now been successful against Videx. We
have already mentioned
that this strikes us as unprincipled. It might
be regarded as unjust that, whereas RSC obtained corporate leniency,
Duraset achieved
a settlement (5% of its total 2008 turnover) and DSI
was punished on the basis that it only perpetrated an isolated
prohibited
act in respect of the second Amplats auction, Videx alone
out of the four cartel members should receive a much heavier
punishment.
Although our finding may (depending on a resolution of
arguments which brought distinctions between various products) result
in
a heavier penalty than that imposed by the Tribunal, we have
mainly been anxious, in our judgment on the merits, to ensure that

the approach to cartel matters and to the concept of continuing
agreements should be clarified.
[146]
The Commission has been substantially
successful in the appeal and cross-appeal and should thus have its
costs, including those
attendant on the employment of two counsel.
(It is noted, though, that due to a personal indisposition the
Commission’s senior
counsel was not able to be present at the
hearing.)
[147]
The following order is thus made,
operative only as between Videx and the Commission:
[a]
The appeal by the appellant (‘Videx’) against the
Tribunal’s decision that Videx contravened s 4(1)(b)(i)

and (ii) of the Competition Act 89 of 1998 (‘The Act’) is
dismissed.
[b] The
cross-appeal of the first respondent (‘the Commission’)
against the Tribunal’s decision, that the
only prohibited
conduct which Videx could be found to have committed was its
collusion in the so-called second Amplats auction,
succeeds and there
is substituted for such decision a finding that Videx, during the
period from the second quarter of 2004 until
February 2007, was party
to a continuing agreement which contravened s 4(1)(b)(i) and
(ii) and which manifested itself in
the various specific incidents
identified in this judgment.
[c]
A decision on the appeal and cross-appeal in regard to the penalty
imposed on Videx, and on the question whether a revised decision
on
the penalty should be made by this court or by the Tribunal on
remittal, stands over for later determination after receipt of
the
submissions contemplated in [d] below.
[d] Videx
and the Commission shall, within three weeks of this order, deliver
written submissions dealing with the matters
identified in para 144
of this judgment and with such other matters as the parties or either
of them consider appropriate to bring
to this court’s attention
in regard to the further disposition of the case.
[e] Videx
is directed to pay the Commission’s costs in the appeal to
date, including those attendant on the employment
of two counsel
(where two counsel were engaged).
DAVIS JP, MOLEMELA AJA & ROGERS AJA
APPEARANCES
For Appellant:

Mr John Butler SC
Instructed by:
Nortons Inc
135 Daisy Street
Sandton, Johannesburg
For Respondent:

As K Pillay (heads by Mr T Motau SC and Ms K Pillay)
Instructed by:
Competition

Commission
DTI
Campus
77
Meintjies Street
Pretoria
[1]
Statement para 7.2 at 2/162. See also the
interrogation transcript at 27/2649.
[2]
14/1441.
[3]
And see also Henson’s interrogation at
27/2650-1.
[4]
27/2652.
[5]
Para 5.5.1 at 1/77-78.
[6]
Para 4.3.1 at 1/112. This statement was annexed
to Videx’s answering affidavit.
[7]
17/1731.
[8]
18/1815.
[9]
18/1756.
[10]
18/1757.
[11]
15/1446-7.
[12]
Para 12.4.6 at 1/40.
[13]
12/1201-2.
[14]
13/1288-9.
[15]
14/1445.
[16]
26/2638.
[17]
18/1794-5.
[18]
25/2467-2470.
[19]
10/1023 and 101025.
[20]
11/1047-8.
[21]
11/1104-5.
[22]
11/1053-4.
[23]
11/1127-8.
[24]
See at 15/1475-6.
[25]
15/1482-3.
[26]
15/1484; 15/1510.
[27]
See interview notes at 20/1998-2002.
[28]
16/1548-9; 16/1554..
[29]
25/2472-2503.
[30]
20/2015.
[31]
10/1027-8.
[32]
12/1233.
[33]
12/1239.
[34]
27/2675 read with
12/1243-13/1244
and 14/1376-7. Henson said in cross-examination that the view he had
expressed to the Commission, namely that
Videx terminated the
contract with Goldfields for the supply of shepherds crooks in the
course of the reorganisation of market
shares, had been erroneous
because it was not borne out by the facts subsequently uncovered by
him. The 'subsequent facts' were
that DSI had terminated its supply
of shepherds crooks to Videx under the sub-contract because DSI was
losing money on the deal.
However, we do not regard this as
inconsistent with what Henson told the Commission, particularly when
one has regard to the
circumstances in which Videx had originally
been awarded the contract by Goldfields in October 2004.
[35]
27/2676 read with
12/1246;
see also 12/1239-1240.
[36]
20/2016.
[37]
10/954.
[38]
20/2017-2018.
[39]
5/518.
[40]
10/1030-1;
12/1152-3.
[41]
18/1749.
[42]
18/1752-3.
[43]
10/960-1.
[44]
20/1988.
[45]
20/1898.
[46]
6/569-570.
[47]
6/607.
[48]
In para 11 of his statement Koszewski dealt with
the February 2006 meeting relating to Anglo Coal.
[49]
3/270; 3/287.
[50]
3/328-329.
[51]
10/1026.
[52]
10/965.
[53]
10/968-969.
[54]
9/885.
[55]
13/1249-1253.
[56]
13/1253.
[57]
8/765.
[58]
13/1253-4.
[59]
13/1254.
[60]
13/1252. Henson thought that RSC's price in the
May 2006 tender was about 30% higher than DSI's price to the Kriel
colliery [13/1261].
[61]
14/1412-1418.
[62]
9/912.
[63]
6/606.
[64]
8/781.
[65]
12/1147; 12/1153-4.