Competition Commission v Cobro Concrete (Pty) Ltd (23/CR/Feb09) [2010] ZACT 25; [2010] 1 CPLR 68 (CT) (31 March 2010)

80 Reportability

Competition Law

Brief Summary

Competition — Settlement Agreement — Allegations of cartel conduct — Cobro Concrete (Pty) Ltd admitted to contraventions of sections 4(1)(b)(i), 4(1)(b)(ii), 4(1)(b)(iii), and 4(1)(a) of the Competition Act — Conduct included price fixing, market division, and collusive tendering in the precast concrete market — Administrative penalty of R 4 022 568.29 agreed upon — Settlement confirmed by the Competition Tribunal as full and final resolution of proceedings.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings were consent order (settlement) confirmation proceedings before the South African Competition Tribunal in terms of the Competition Act 89 of 1998 (as amended). The matter came before a Tribunal panel constituted by N Manoim (Presiding Member), Y Carrim, and A Wessels and was both heard and decided on 31 March 2010.

The parties were the Competition Commission (as applicant) and Cobro Concrete (Pty) Ltd (as respondent). The matter was presented to the Tribunal on the basis of an agreement concluded between the Commission and Cobro, in which they sought an order confirming a settlement agreement (also described as a consent agreement) as a Tribunal order.

The procedural history reflected in the judgment and annexed agreement was that the Commission received a corporate leniency application in December 2007 (from Rocia (Pty) Ltd) relating to alleged cartel conduct in the precast concrete market. The Commissioner then initiated a complaint and investigation on 19 March 2008 under Commission case number 2008Mar3595, which culminated in a referral to the Tribunal under Tribunal case number 23/CR/Feb09 and, ultimately, the settlement agreement signed in early 2010 and presented for confirmation.

The general subject-matter of the dispute concerned alleged and admitted cartel conduct in the markets for precast concrete products (including pipes, manholes, culverts, and manhole covers) in South Africa, including conduct characterised as price fixing, market division, and collusive tendering, in contravention of section 4 of the Competition Act.

2. Material Facts

The material facts relied upon by the Tribunal were those contained in the settlement agreement and the Tribunal’s confirmation of that agreement. The agreement recorded that in December 2007 the Commission received a leniency application from Rocia (Pty) Ltd regarding a cartel in the precast concrete market. The leniency information implicated Cobro and other firms, including (as described in the agreement) SPC, Concrete Units, Cape Concrete, Cobro, Grallio, Empowa-Grinaker, Craig Concrete, Conrite Walls, and D&D Concrete, in coordinated conduct affecting precast concrete products.

On 19 March 2008, the Commissioner initiated a complaint investigation in terms of section 49B of the Act. The Commission’s investigation (as recorded in the agreement) found that, over extended periods ending in September 2007 and November 2007 respectively, Cobro and various competitors engaged in cartel arrangements implemented through meetings and supported by exchanged documentation (including price lists and “modus operandi” documentation).

The agreement recorded findings and admissions that the cartel conduct included price fixing and the fixing of trading conditions in relation to manholes and pipes, including agreements on prices to be quoted to customers/contractors, price increases, discounts, and credit terms. It further recorded that the arrangements had the effect of preventing and/or limiting price competition among the participants in relation to pricing of precast concrete pipes and culverts.

The agreement also recorded market division conduct, particularly in the KwaZulu-Natal (Natal) market, including allocation of customers/contracts by agreed percentage shares in the market for manholes (with changes over time, including arrangements involving Cobro, D&D Concrete, Conrite Walls, and later Rocla) and the allocation of territories. The agreement additionally recorded monthly payments by Cobro (approximately R30 000 per month) to Conrite Walls to ensure that Conrite Walls did not enter the manhole market, with D&D paying Conrite Walls approximately R10 000 per month.

For pipes, the agreement recorded that Cobro, Rocla, Infraset, and Grallio divided the Natal market through allocation of customers/contracts according to agreed market shares, allocation of territories, and allocation of specific goods to be supplied by each firm. For culverts in KwaZulu-Natal, the agreement recorded an arrangement in terms of which Rocla would supply culverts without competition from Infraset, Grallio, and Cobro.

Finally, the agreement recorded collusive tendering conduct over the period 1986 to November 2007, in which Cobro and other firms collectively agreed on tender prices for government contracts, allocated contracts in accordance with agreed market shares for pipes, manholes, and culverts, and coordinated quotations to contractors to secure such contracts.

No disputes of fact were identified in the judgment as it was determined on the basis of a settlement. The essential factual content was recorded as the Commission’s findings and, crucially, as admitted by Cobro in the settlement agreement.

3. Legal Issues

The central legal question before the Tribunal was whether it should confirm the settlement agreement as an order of the Tribunal, as requested by the Commission and Cobro, in terms of section 58(1)(a)(iii) of the Competition Act.

The matter also necessarily engaged the legal characterisation of the admitted conduct as contraventions of section 4 of the Act, specifically the prohibitions relating to agreements or concerted practices between competitors involving price fixing, market allocation, and collusive tendering, as well as the imposition of an administrative penalty under sections 58 and 59.

The dispute did not present a contested factual inquiry or an evaluative merits determination in the usual adversarial sense. Instead, it principally concerned the application of the Act’s remedial provisions to agreed and admitted facts, and the Tribunal’s function in making the agreed terms an order of the Tribunal.

4. Court’s Reasoning

The Tribunal’s reasoning, as reflected in the judgment, was concise and procedural in nature. The Tribunal recorded that it confirmed the order as agreed to and proposed by the Competition Commission and the respondent, annexed to the judgment and marked “A”. The Tribunal therefore proceeded on the basis that the parties had presented a settlement agreement seeking confirmation as a Tribunal order under the relevant empowering provision of the Act.

The settlement agreement itself set out the statutory framework underpinning the proposed order. It recorded that the Commission and Cobro agreed to approach the Tribunal for an order under section 58(1)(a)(iii). It further recorded Cobro’s admissions of contraventions of sections 4(1)(b)(i), 4(1)(b)(ii), 4(1)(b)(iii), and 4(1)(a), tied to the conduct described (price fixing, fixing of trading conditions, market allocation, and collusive tendering over the relevant periods).

On remedy, the agreement recorded that, having regard to section 58(1)(a)(iii) read with sections 59(1)(a), 59(2), and 59(3), Cobro accepted liability for an administrative penalty. The penalty was agreed at R 4 022 568.29, stated to be 6.5% of Cobro’s turnover for the financial year ending 2008, and payable within six months of confirmation. The agreement also recorded that the Commission would pay the penalty into the National Revenue Fund in terms of section 59(4).

In addition to the penalty, the agreement addressed forward-looking remedial steps. Cobro agreed to cooperate fully with the Commission in prosecutions of other firms arising from the investigation, including testifying in support of the Commission’s case and providing evidence. Cobro also agreed to develop and implement a formal compliance programme incorporating corporate governance measures to prevent contraventions of section 4(1)(b), and to submit a copy of that programme to the Commission within 60 days of confirmation.

The Tribunal’s confirmation of the agreed order reflected acceptance of the settlement mechanism contemplated by the Act, with the Tribunal making the parties’ agreed terms binding as an order of the Tribunal, thereby finalising the proceedings between them on the subject of the complaint investigated under case number 2008Mar3595.

5. Outcome and Relief

The Tribunal confirmed the consent order/settlement agreement concluded between the Competition Commission and Cobro Concrete (Pty) Ltd, annexed to the judgment as “A”.

As confirmed, the order included Cobro’s admission of contraventions of the Competition Act (as specified in the agreement), Cobro’s obligation to pay an administrative penalty of R 4 022 568.29 within six months of confirmation, Cobro’s undertaking to cooperate with the Commission in related prosecutions, and Cobro’s undertaking to implement and submit a competition law compliance programme within 60 days of confirmation.

No separate costs order was recorded in the Tribunal’s brief confirmation order as reproduced in the judgment.

Cases Cited

No cases were cited in the judgment text provided.

Legislation Cited

Competition Act 89 of 1998 (as amended), including sections 4(1)(a), 4(1)(b)(i), 4(1)(b)(ii), 4(1)(b)(iii), 19, 22, 26, 49B, 58(1)(a)(iii), 59(1)(a), 59(2), 59(3), and 59(4).

Rules of Court Cited

No rules of court were cited in the judgment text provided.

Held

The Competition Tribunal made an order confirming, as a Tribunal order, the settlement agreement between the Competition Commission and Cobro Concrete (Pty) Ltd. The confirmed order reflected Cobro’s admissions of cartel conduct contravening section 4 of the Competition Act, imposed an agreed administrative penalty of R 4 022 568.29 payable within six months, and required Cobro to cooperate with the Commission in related enforcement proceedings and to implement and submit a compliance programme within 60 days.

LEGAL PRINCIPLES

The matter applied the principle that the Competition Tribunal may, where the Competition Commission and a respondent conclude a settlement agreement, confirm that agreement as an order of the Tribunal under section 58(1)(a)(iii) of the Competition Act, thereby finalising proceedings between those parties on the complaint covered by the settlement.

The matter further applied the Act’s remedial framework permitting the imposition, by agreement and confirmation, of an administrative penalty under sections 58 and 59 in respect of admitted contraventions of the cartel prohibitions in section 4, and permitting associated remedial undertakings, including cooperation with ongoing investigations/prosecutions and the implementation of a competition compliance programme, as part of a full and final settlement.