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[2009] ZACT 33
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Competition Commission South Africa v Sasol Chemical Industries Ltd; Competition Commission South Africa v Sasol Chemical Industries Ltd and Others (31/CR/May05) [2009] ZACT 33 (20 May 2009)
COMPETITION
TRIBUNAL REPUBLIC OF SOUTH AFRICA
Case
No: 31/CR/May05
CC
Case NO'S: 2007AUG3147 & 2007DEC3382
The
Competition Commission South Africa Applicant
And
Sasol
Chemical Industries Ltd Respondent
In
re:
The
Competition Commission South Africa Applicant
And
Sasol
Chemical Industries Ltd First Respondent
Yara
South Africa (Pty) Ltd Second Respondent
Omnia
Fertilizer Ltd Third Respondent
And
In
re:
The
Competition Commission South Africa Applicant
And
Foskor
(Pty) Ltd Respondent
In
the matter between:
Sasol
Chemical Industries Ltd
Second
Respondent
Panel
:
D Lewis (Presiding Member), N Manoim (Tribunal Member), and Y
Carrim
(Tribunal Member)
Heard
on : 20 May 2009 Decided on : 20 May 2009
ORDER
The
Tribunal hereby confirms as an order, the consent and settlement
agreement proposed by the Competition Commission and the
respondent
in respect of CC Case NO'S: 2007AUG3147 & 2007DEC3382 and CT
31/CR/May05, attached hereto as Annexure A.
D
Lewis
Concurring:
N Manoim and Y Carrim
âANNEXURE
Aâ
BEFORE
THE COMPETITION TRIBUNAL OF SOUTH AFRICA
(PRETORIA)
CT
CASE NO: 31/CR/May05 & CC CASE NO'S: 2007AUG3147 &
2007DEC3382
in
the matter between:
THE
COMPETITION COMMISSION OF SOUTH AFRICA
Applicant
and
SASOL
CHEMICAL INDUSTRIES LIMITED
Respondent
In
re:
THE
COMPETITION COMMISSION OF SOUTH AFRICA
Applicant
and
SASOL
CHEMICAL INDUSTRIES LIMITED
First
Respondent
YARA
SOUTH AFRICA (PTY) LIMITED
Second
Respondent
OMNIA
FERTILIZER LIMITED
Third
Respondent
and
in re:
THE
COMPETITION COMMISSION OF SOUTH AFRICA
Applicant
and
FOSKOR
{PTY) LIMITED
First
Respondent
SASOL
CHEMICAL INDUSTRIES LIMITED
Second
Respondent
CONSENT
AND SETTLEMENT AGREEMENT BETWEEN THE COMPETITION COMMISSION AND
SASOL CHEMICAL INDUSTRIES LTD IN REGARD TO CONTRAVENTIONS
OF SECTION
4(1
)
OF
THE
COMPETITION ACT 89 OF 1998
The
Competition Commission and Sasol Chemical Industries Ltd hereby
agree that application be made to the Competition Tribunal
for
confirmation of this Consent and
Settlement
Agreement as an order of the Tribunal in terms of sections 49D and
58(1)(a)(iii) of the Competition Act 89 of 19S8
(as appropriate), on
the terms set out below:
1
Definitions
1.1 "Act"
means the
Competition Act 89 of 1998
;
1.2 "AECr
means African Explosives and Chemical Industries Limited, a public
company registered and incorporated in accordance
with the laws of
the Republic of South Africa with its registered office
alternatively principal place of business at 24
t
The Woodlands, Woodmead, Sandton, South Africa;
1.3 "ANS"
means ammonium nitrate solution;
1.4. "CLP"
means the Corporate Leniency Policy prepared and issued by the
Commission as a guideline to clarify the Commission's
policy
approach on matters falling within its jurisdiction in terms of the
Act;
1.5 "Commission"
means the Competition Commission of South Africa, a statutory body
established in terms of
section 19
of the Act, with its principal
place of business at Building C, Mulayo Building, DTI Campus, 77
Meintjies Street, Sunnyside,
Pretoria, South Africa;.
1.6 "Commissioner"
means the Commissioner of the Competition Commission appointed in
terms of
section 22
of the Act;
1.7 "DAP"
means di-ammonium phosphate;
1.8 "Foskor"
means Foskor (Pty) Limited, a company registered and incorporated in
accordance with the laws of the Republic
of South Africa with its
registered office alternatively principal place of business at Block
G, Rivervsew Office Park, Janadel
Road, Midrand;
1.9 "ICH"
means Industrial Commodities Holdings, a company registered and
incorporated in accordance with the laws of
the Republic of South
Africa
with its registered office alternatively principal place of business
at 19 Bath Ave, cnr Selby Road, Parkwood, 2193;
1.10 "IPC"
means the Import Planning Committee;
1.11 "LAN"
means limestone ammonium nitrate;
1.12 "MAP"
means mono-ammonium phosphate;
1.13
"NBC" means Nitrogen Balance Committee;
1.14
"Nutrl-Flo" means Nutri-FJo CC and Nutri-Fertilizer CC,
close corporations registered and Incorporated in accordance
with
the laws of the Republic of South Africa, with their registered
office, alternatively principal place of business, at Nutri
Park
(opposite Compensation Station), Umhlali, Kwazulu-Natai, South
Africa;
1.15 "Nutri-Flo
referral" means the Complaint Referral referred to the Tribunal
by the Commission under case number
31/CR/May05;
1.16 "Omnia"
means Omnia Fertilizer Limited, a public company registered and
incorporated in accordance with the laws
of the Republic of South
Africa with its registered office, alternatively principal place of
business, at 13 Stoane.Street, Epson
Downs, Bryanston, South Africa;
1.17 "Saspr
means Sasol Chemical Industries Limited, a company registered and
incorporated in accordance with the laws of
the Repufeiio of South
Africa, with its registered office, alternatively principal place of
business, at 15 Baker Street, Rosebank,
Johannesburg, South Africa;
1.18 "Sasol
Nitro" is the division of Sasol Chemical Industries Limited
which encompasses the business activities and
conduct which are the
subject of this agreement;
1.19 "Settlement
Agreement" means this consent and settlement agreement duly
signed and concluded between the Commission
and Sasol;
1.20 "Tribunal"
means the Competition Tribunal of South Africa, a statutory body
established in terms of
section 26
of the Act, with its principal
place of business at Building C, Wlulayo Building, DTI Campus, 77
lUIeintjies Street, Sunnyside,
Pretoria; and
1.21 "Yara"
means Yara (South Africa) (Pty) Limited, a company previously known
as Kynoch Fertilizer (Pty) Limited (hereinafter
referred to, for
convenience, as 'Kynoch') that is registered and incorporated in
accordance with the laws of the Republic of
South Africa, with its
registered office, alternatively principal place of business, at 272
Pretoria Avenue, Randburg, South
Africa.
Complaint
investigations and Commission's findings
2
The Nutri-Flo referral
2.1
Nutri-Flo lodged a complaint with the Commission on 3 November 2003
against Sasol, in which it alleged that Sasoi and its
competitors
(Kynoch and Omnia) were engaged in the following conduct
2.1.1
collusion in dividing the market for LAN;
2.1.2 collusion
in respect of prices of LAN and of certain other fertilizers;
2.1.3 excessive
pricing in respect of LAN and ANS; and
2.14
exclusionary conduct through an effective margin squeeze, which
became increasingly severe after Nutri-FIb lodged the second
complaint with the Commission, and which resulted in it closing its
granulation facility.
2.2
The Commission then conducted an investigation into the matter as a
result of which it found that Sasol, Kynoch and Omnia
had
contravened
section 4
of the Act as alleged. Pursuant to its
investigation, the Commission found that the following
anti-competitive conduct occurred
in contravention of
section 4
of
the Act:
2.2.1 Collusion
in constructing and dividing the market such that Sasol became the
exclusive supplier of LAN to the wholesale
market;
2.2.2 Agreements,
arrangements and understandings concluded within the IPC, NBC and
Export Club that amount to collusion in respect
of ammonia, potash,
urea, MAP, DAP and LAN; and
2.2.3 Excessive
pricing and exclusionary conduct, the details of which are not
relevant for the purposes of this Agreement.
2.3 On
4 May 2005 the Commission referred the Nutri-Flo Complaint to the
Tribunal under CT case number 31/CR/May05. The respondents
in the
Nutri-Flo referral are Sasol, Omnia and Kynoch. The referral was
subsequently amended by the Commission.
2.4. In
the Nutri-Flo referral, as amended, the Commission alleges that the
respondents have contravened:
2.4.1
section
4(1
)(b) alternatively
section 4(1
)(a) of the Act;
2.4.2
section
8(c)
alternatively
section 8(d)(ii)
of the Act; and
2.4.3
section
8(a)
of the Act
2.5
In
respect of
section 4(1)
the Commission found that Sasol, Omnia
and
Kynoch have contravened
section 4(1)(b)
, alternatively
section 4(1)(a)
of
the Act, due to the following conduct:
2.5.1 Sasol
entered into a framework of agreements, arrangements and
understandings with Omnia, Kynoch and AECI which had the
effect of
constructing and dividing the market in such a way as to ensure that
Sasol became the exclusive supplier of LAN to
the wholesale market,
as well as maintaining agreed margins.
2.5.2 Sasol
established and participated in various committees composed of
producers and suppliers. The members of these committees
included
Sasol, Kynoch and Omnia. These committees included the IPC, the NBC
and the Export Club. These committees were used,
amongst other
things, to: coordinate business practices and goals; exchange
information about production, supply and demand;
allocate,
redistribute and swap sales by reference to sales targets,
prevailing market shares and product availability; and agree
on
export volumes and prices, directly or indirectly fixing prices,
dividing markets by allocating customers, suppliers or specific
types of goods.
2.5.3 The
products covered in the committees included ammonia, potash, urea,
MAP, DAP, LAN and ANS. The committees aimed to ensure
'balance' of
supply and demand at well understood and communicated pricing
levels,
2.5.4 The
agreements, arrangements and understandings in the committees had
the effect of directly or indirectly fixing prices,
and dividing
markets by allocating customers, suppliers or specific types of
goods.
2.5.5 Further,
the anti-competitive effect of these agreements, arrangements and
understandings is .substantial In that they serve
to lessen the
capacity of competitors, including Nutri-Flo, to supply fertilizers
to the market at lower rates and to expand
their penetration of the
market; and, they generally operate to the detriment of consumers,
2.5.6 No
technological, efficiency or other pro-competitive gain has been
demonstrated to outweigh such effects within the contemplation
of
section 4(1
)(a) of the Act.
3
The Foskor matter
3.1
On 23 August 2007, the Commissioner initiated a complaint against
Foskor and Sasof regarding possible contraventions of
section 4
the
Act with regards to phosphoric acid. On 3 December 2007, the
Commission received a complaint from the animal feeds producers
(i.e. Bto-Minerale (Pty) Ltd, Kemira Phosphate (Pty) Ltd t/a KK
Animal Nutrition, N-West Fosfaat CC and SA Feed Phosphates (Ply)
Ltd) against Foskor and Sasoi on substantially identical charges
/-allegations regarding the tolling agreement.
3.2 On
12 May 2008, Foskor applied for corporate leniency in terms of the
Commission's CLP in relation to contraventions of
section 4(1)(b)
of
the Act.
3.3 The
conduct under investigation and referred to in the corporate
leniency application, insofar as such conduct contravenes
section 4
of the Act, relates to the toll production agreement between Sasol
and Foskor, and related interactions and communications between
Sasol and Foskor on various levels. In particular, this conduct
relates to division of markets by allocating customers and
territories with regard to phosphoric acid and its derivatives.
4
Settlement discussions
4.1 As
a result of a competition law compliance review initiated by Sasol
Limited during July 2008, Sasoi identified areas of
concern and on i
December 2008
(
Sasol filed a marker application under the Commission's CLP in
respect of the contravention of
section 4(1
)(b) relating to price
fixing of various fertilizer products. The Commission rejected the
application as it was not in a position
to evaluate the need, for a
marker, given the scope of the immunity sought and the applicability
of the CLP thereto, taking into
account pending investigations and
matters that had been referred which may be relevant.
4.2 On
15 December 2008, Sasof applied for a marker for possible
contraventions of
section 4(l)(b)(ii)
of the Act in relation to
dividing markets by allocating suppliers, territories, or specific
types of goods in export markets,
in respect of phosphoric acid. The
Commission rejecjed
the application taking into account pending investigation^) and/or
existing application's) for leniency.
4-3
Sasoi's attorneys sent a letter to the Commission on 19 December
2008 in which they proposed to settle the complaint referrals
insofar as they relate to contraventions of
section 4(1
)(b) of the
Act as well as additional contraventions of
section 4(1
)(b) which
had not yet been referred to the Tribunal.
4.4
In this letter, Sasoi's attorneys confirmed that their client has
engaged in the following conduct in contravention of the
Act:
4.4.1
During the period from 1996 to 2004, Sasol and its competitors,
Omnia and Kynoch met and agreed to;
4.4.1.1 fix
prices in respect of certain fertilizer products in contravention of
section 4(1)(b){i)
of the Act;
4.4.1.2 divide
markets by allocating customers and the manufacture of certain
products in contravention of
section 4(1)(b){ii)
of the Act; and
4.4.1.3 collusiveiy
tender for supply contracts in contravention of
section 4(1)(b){iii)
of the Act.
4.5
The conduct referred to above occurred in,
inter
alia:
4.5.1
KwaZulu Natal;
4.5.2
Gauteng;
4.5.3
Free State;
4.5.4
Mpumalanga;
4.5.6
Limpopo
4.5.6
Western Cape; and
4.5.7
Eastern Cape.
4.6
The products in respect of which the admitted contraventions of
section 4(1)(b)
took place include:
4.6.1 Nitrogen-based
fertilizers including LAN, urea, ammonium sulphate and ammonium
sulphate nitrate;
4.6.2 Phosphate-based
fertilizers including MAP, DAP and various blended products;
4.6.3 Potassium-based
fertilizers including. potassium chloride, potassium sulphate and
potassium nitrate; and
4.6.4 Blends
of the nitrogen-, phosphate- and potassium- based fertilizers.
4.7. Sasol
and the Commission then engaged in protracted settlement
discussions, the outcome of which is this Settlement Agreement.
4.8. Pursuant
to further internal investigation by Sasol, Sasol identified the
conduct described in 5.1.9 below on 12 May 2009,
which conduct was
confirmed after subsequent interviews held on 14 May 2009,
5
Admissions
5.1
Sasol admits the following facts:
5.1.1. Sasol
entered into a series of agreements, arrangements and understandings
with Omnia, Kynoch and AECl, including but not
limited to, the
tolling and supply agreements relating to the products referred to
in this Settlement Agreement.
5.1.2 These
agreements, arrangements and understandings contributed to Sasol
becoming the principal supplier of LAN to wholesale
customers.
5.1.3. Sasol
participated in the IPC, the Export Club and the NBC, which was
established by Sasol. These committees were composed
of producers
and suppliers. The members of these committees included Sasol,
Kynoch and Omnia.
5.1.4 These
committees were used, amongst other things, to coordinate
business practices; to exchange information about production,
supply
and demand; to allocate, redistribute and swap product by reference
to sales targets, prevailing market shares and product
availability
monthly, by product and market and to discuss export volumes.
5.1.5 From
the exchange of such information the members of the committees were
able to derive forecasted market shares.
5.1.6 The
NBC was also used to ensure balance of supply and demand.
5.1.7 The
members of the committees engaged in swaps of various products and
in particular, in relation to LAN, potash and urea.
Such swaps were
facilitated by the exchange of the information referred to above.
5.1.8 The
products variously covered in the committees included ammonia,
potash, urea, MAP, DAP, LAN, ammonium sulphate, sulphate
of potash,
triple super phosphate and ANS. Members of the committees further
communicated estimated landed cost of imported products
based upon
published international prices and estimated freight costs.
5.1.9 In
2001, a meeting was held between managers and/or employees of Sasol
Nitro, Omnia and Kynoch at a hotel in Johannesburg.
At the meeting,
agreement was reached between Sasol Nitro, Omnia and Kynoch as to
pricing formulae from which base prices would
be derived for the
fertilizer products sold by the parties to the agreement. Agreement
was also reached as to the range of discounts
that the parties would
offer off the base prices. In the period of approximately 2001 to
2005, meetings were held between Sasol
Nitro, Omnia and Kynoch in
order to address any instance of deviations by any of other parties
from the agreement. To the best
of Sasoi's knowledge, no meetings
were heid after 2005 but Sasol is not able to say whether the other
parties continue to apply
the formulae in respect of fertilizer
products. Sasol Nitro continues to price its fertilizer products
according to the concepts
embodied in the original formulae;
however, Sasol Nitro has independently amended the formulae in a
number of material respects,
specifically the margins.
5.1.10
The existence of the committees described in
5.1.3
- 5.1.8 above facilitated the continued application of the pricing
agreement described in 5.1.9 above.
5.2 Sasol
admits the facts as set out in paragraph 5.1 and admits that it has
contravened
section 4(1)(b)
of the Act in those respects.
5.3 Sasol
admits the facts as set out in paragraph 3.3 above and admits that
it has contravened
section 4(1)(b)
of the Act in those respects.
5.4 Sasol
admits the
faGts
as
set out in paragraphs 4.4 to 4.6 above and admits that it has
contravened
section 4(1
)(b) of the Act in those respects,
6
Agreement concerning future conduct
Sasol
undertakes to;
6.1 circulate
a statement summarising the content of this Settlement Agreement to
all Sasol employees who are middle managers
and above or of job
grading level 5 and above within 30 days of the date of confirmation
of this Agreement as an order of the
Tribunal;
6.2 desist
from
ail
anti-competitive behaviour;
6.3 develop
and implement a compliance programme, with corporate governance
designed to ensure that all employees are aware of
the provisions of
the Act and do not contravene them; and
6.4 submit
a copy of the compliance programme outlined above to the Commission
within 90 days of the date of confirmation of this
Agreement as an
order of the Tribunal.
7
Co-operation
7.1 Sasol
undertakes to co-operate fully with the Commission in its
prosecution of the remaining respondents in the Nutri-Flo
referral
7.2 This
assistance includes, but is not limited to:
7.2.1 providing
the Commission with ail relevant evidence available to it that might
assist the Commission in its prosecution
of the remaining
respondents in the Nutri-Flo referral under
section 4
; and
1.1
6in; margin-top: 0.14in; margin-bottom: 0in; line-height: 0.23in">
7.2. ensuring
that all current Sasol employees, and to the extent possible, former
employees, who have knowledge of these contraventions
are available
to and do co-operate with the Commission in good faith, both for the
purposes of consultation and to give evidence
in proceedings before
the Tribunal.
8
Administrative
penalty
In
terms of
section 58(1)(a)(iii)
and
59
(1)(a),
59
(2) and
59
(3) of the
Act, Sasol is liable to pay an administrative penalty,
An
administrative penalty in the amount of 8 per cent of Sasol Nitro's
turnover (excluding turnover attributable to detonators
and certain
accessories) for the financial year ending in 2004/2005 is hereby
imposed on Sasol for the
section 4(1)(b)
contraventions by its
Sasol Nitro division set out above. This penalty amounts to R250
680 000,00 (two hundred and fifty million
six hundred and eighty
thousand rand )
8.3
The penalty amount will be paid by Sasol to the Commission within 60
days of the date of confirmation of this Settlement Agreement
as an
order of the Tribunal
9
Full and final resolution
This
Settlement Agreement is entered into in
full
and
final settlement and upon confirmation as an order by the Tribunal,
concludes all proceedings between the Commission and Sasol
relating
to alleged contraventions of
section 4(1)
of the Act that are the
subject of the Commission's complaint referral under CT case number
31/CR/MayQ5, the conduct referred to
in paragraphs 4.4 - 4.6 above,
the conduct referred to in paragraph 5.1 above and the Commission's
investigations under CC case
numbers 2007AUG3147 and 20G7DEC3382,
Dated
at _________ on this the______ day of _____ 2009
Director
of Sasol Chemical Industries Limited
Authorised
signatory for Sasol Chemical Industries Ltd
Dated
at _________ on this the______ day of _____ 2009
Shan
Ramburuth
Commissioner,
Competition Commission