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[2010] ZACT 48
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Competition Commission South Africa v Sasol Chemical Industries Ltd, In re: Competition Commission South Africa v Sasol Chemical Industries Ltd and Others (45/CR/May06, 31/CR/May05) [2010] ZACT 48; [2010] 2 CPLR 231 (CT) (20 July 2010)
COMPETITION
TRIBUNAL REPUBLIC OF SOUTH AFRICA
Case
No: 45/CR/May06 & 31/CR/May05
In
the matter between:
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
African
Explosives and Chemical Industries Ltd
…..................................
Third
Respondent
And
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
Panel
Norman
Manotm (Presiding Member), Andreas Wessels (Tribunal Member) and
Mbuyiseli Madfanga (Tribunal Member)
Heard
on
14
July 2010
Decided
on
20
July 2010
ORDER
The
Tribunal hereby confirms the settlement agreement annexed hereto
marked annexure I, as well as the first and second addenda
thereto,
marked annexures II and III respectively.
Norman
Manoim
Concurring:
Andreas Wessels and Mbuyiseli Madlanga
COMPETITION
TRIBUNAL OF SOUTH AFRICA
(HELD
IN PRETORIA)
Case
No.: 45/CR/May06
And
Case
No.: 31/CR/May05
In
the matter between:
OMNIA
FERTILISER LTD
….............................................................................
First
Applicant
AFRICAN
EXPLOSIVES LTD
…....................................................................
Second
Applicant
And
THE
COMPETITION COMMISSION
…...........................................................
First
Respondent
SASOL
CHEMICAL INDUSTRIES LTD
…................................................
Second
Respondent
In
Re:
THE
COMPETITION COMMISSION
….....................................................................
Applicant
And
SASOL
CHEMICAL INDUSTRIES
…......................................................................
Respondent
And
In
Re:
Case
No.: 45/CR/May06
THE
COMPETITION COMMISSION
…..................................................................
Applicant
SASOL
CHEMICAL INDUSTRIES LTD
…......................................................
First
Respondent
YARA
SOUTH AFRICA (PTY) LTD
….......................................................
Second
Respondent
AFRICAN
EXPLOSIVES AND CHEMICAL INDUSTRIES LTD
…................
Third
Respondent
And
In
Re:
Case
No.: 31/CR/May06
THE
COMPETITION COMMISSION
…...............................................................
Applicant
SASOL
CHEMICAL INDUSTRIES LTD
….............................................
First
Respondent
YARA
SOUTH AFRICA (PTY) LTD
…..................................................
Second
Respondent
OMNIA
FERTILISER LTD
…..................................................................
Third
Respondent
Panel
:
Norman Manoim (Presiding Member), Andreas Wessels (Tribunal
Member)
and Mbuyiseli Madlanga (Tribunal Member) Heard on : 14 July 2010
Decided on : 20 July 2010
Reasons
and Order
[1]
This is an application for the confirmation of a settlement
agreement entered into between the Competition Commission (the
'Commission') and Sasol Chemical Industries Limited ('Sasol') that
purports, as between these two parties, to settle two complaints
in
terms of sections 8 and 9 of the Competition Act 89 of 1998 ('the
Act") known as the 'Nutri-Flo'
1
and
'Profert'
2
complaints.
3
[2]
The settlement was reached shortly before we were to commence our
hearing into these complaints which had been consolidated
for the
purpose of hearing.
4
[3]
Prior to hearing the application to confirm the agreement, the
Tribunal invited interested parties to make submissions on
whether
we should confirm the agreement.
[4]
Omnia Group (Pty) Ltd ('Omnia') and African Explosives Limited
('AEL') proposed specific amendments to the draft agreement
in
written submissions to us. At the commencement of the hearing we
invited the Commission and Sasol to respond to these suggestions.
They came back with a draft addendum in which they purported to do
so. The addendum satisfied AEL and hence its submissions need
not be
considered further.
5
[5]
The other objector, Omnia, was not satisfied and it requested that
the Tribunal insert in the order, language that it considered
better
preserved its rights.
6
Sasol
and the Commission were unwilling to include this wording.
[6]
As there were no objections from any party to the remaining terms of
the agreement and indeed much support for it,
inter
alia
from
the two complainants, Nutri-Flo and Profert, we confine ourselves in
these reasons to the objection that Omnia raised because
this was
the only issue in dispute before us.
[7]
We need to consider the nature of the settlement agreement to see
how Omnia's concerns arose.
[8]
The first relevant feature of the agreement is that it contains no
admission of liability by Sasol, and indeed provides an
express
disclaimer.
7
Despite
this, it contains a wide range of binding behavioural undertakings
for at least a 10 year period and an undertaking to
divest of
certain assets. The second feature of the agreement relevant to this
consideration is that it settles the Profert and
Nutri-Flo complaint
referrals as between the Commission and Sasol. This is contained in
clause 10 of the settlement agreement
which provides as follows:
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 SCI relating to alleged
contraventions of section 8 and 9 of the Act that are the
subject of
the Nutri-Flo referral and the Profert referral and which are the
subject of the Commission's investigations under
case numbers
2003Dec770 and 2004Aug1148".
Omnia's
concern
[9]
Omnia is both a customer and rival of Sasol. Since 1996 it has had a
supply agreement with Sasol for ammonia and it alleges
that a
dispute exists between it and Sasol over the latter's pricing, which
Omnia contends amounts to an abuse of dominance by
Sasol.
[10]
Omnia has not, unlike Profert and Nutri-Flo, laid a complaint with
the Commission in respect of this conduct. It relies on
the fact
that it raised Sasoi's alleged conduct in its discussions with the
Commission and provided the Commission with a witness
statement from
its managing director for the purpose of the complaints proceedings
that are now the subject of this settlement,
as past evidence of its
intentions in this regard.
8
[11]
Omnia says it may wish to proceed with a damages action against
Sasol in the High Court as a result of the loss it has allegedly
suffered, because of Sasoi's abuse of dominance. It is common cause
that: (1) in order to do so it must have a certificate issued
by the
Chairperson of the Tribunal in terms of section 65(6)(b) of the Act
certifying
inter
alia
that
the
"..conduct
constituting the basis for the action has been found to be a
prohibited practice in terms of
this
Act.."
(2)
that it would not be competent for the Tribunal's Chairperson to do
so on the basis of the settlement agreement because the
agreement
contains no admission of liability.
[12]
This means that if the settlement agreement concludes the
proceedings between the Commission and Sasol, Omnia would have
to
bring its own application for a declaration that the conduct it
complains of constituted a prohibited practice, then obtain
a
certificate and proceed with its claim for damages in a civil court.
[13]
Omnia argues that if the settlement agreement is confirmed it will
not be able to institute these civil proceedings, through
the steps
outlined above because Sasol may be able to raise as a defence to
any application it brings, the provisions of section
67(2) of the
Act which states:
"A
complaint may not be referred to the Competition Tribunal against
any firm that has been a respondent in completed proceedings
before
the Tribunal under the same or another section of this Act relating
substantially to the same conduct"
[14]
Omnia asks us to accept that its complaint, when and if it is
brought, will relate to conduct substantially the same as
contemplated in the Profert and Nutri-Flo referrals.
[15]
The Tribunal has previously held in
Competition
Commission v South African Airways Limited, Comair Limited and
Nationwide Limited ('Comair
3
)
9
that
the terms of a settlement agreement, where a respondent does not
admit liability, does not constitute a completed proceeding
and
hence cannot deprive a person in the position of Omnia from bringing
an application of the kind contemplated in section 49D(4)
of the Act
which states:
'A
consent order does not preclude a complainant from applying for -
(a)
a declaration in terms of section 58(1)(a)(v) or(vi); or
(b)
an award of civil damages in terms of section 65, unless the consent
order includes an award of damages to the complainant."
[16]
Omnia argues that there is legal uncertainty about the correctness
of our decision in
Comair
because
of a subsequent decision of the Competition Appeal Court (CAC) in
Glaxo
Smith Kline South Africa Pty Ltd v David Lewis NO and 10 others
10
(Glaxo)
where
the CAC held that the mechanism of section 49D did not apply where
the agreement was concluded after the complaint had been
referred,
as
in
cast/.
11
The
Court however said it was nevertheless competent, even after
referral, for the Commission and respondent to agree the terms
of a
settlement. The Court in that matter did not need to pronounce on
the effect of such a settlement on a complainant's or
other persons
rights to obtain a declaration in order to institute civil
proceedings.
[17]
Omnia argues that because of the legal uncertainty, its rights
should be afforded protection by language that should be inserted
in
the settlement agreement that acknowledges its right, and that of
other third parties, to submit their own complaints to the
Commission against Sasol notwithstanding that the conduct may be
substantially the same as that referred to in the settlement
agreement.
[18]
It seeks from the Tribunal three alternative forms of relief (1)
that the Tribunal 'requires' the parties to insert such
a clause in
the agreement by way of an addendum, (2) that if the parties are
unwilling to do so the Tribunal insert such a rider
in its order
confirming the settlement agreement or (3) the Tribunal should
refuse to confirm the settlement agreement out of
considerations of
fairness.
[19]
When the hearings commenced we asked the Commission and Sasol to
indicate their response to this submission.
[20]
They prepared a draft addendum in response but expressly reserved
Sasol's rights as respondent under section 67 of the Act.
12
It
is not necessary for us to set out that language as all are agreed
that its terms do not preclude Sasol from raising the section
67(2)
defence if it is indeed competent.
[21]
Sasol and the Commission argue that the agreement should not grant
Omnia a greater right than it would have if the agreement
was not
confirmed. The Commission argued that if there was no settlement and
the case was litigated and the Tribunal made no
finding of a
prohibited practice, Omnia would still have no basis to institute a
civil action and hence the rights it is seeking
exceeded those it
was entitled to. Omnia answered this by saying it was not seeking a
greater right, but preventing the extinction
of its rights by the
conclusion of a settlement agreement that might be construed as
completed proceedings.
[22]
In terms of our precedent we do not consider that Omnia's rights
have been extinguished in terms of section 67(2) by a settlement
made on these terms. Therefore we do not regard a settlement of this
nature where we are required to make no finding and which
contains
no admission of liability as a completed proceeding for the purpose
of section 67(2). The Tribunal's reasons for coming
to this
conclusion are fully set out in the
Comair
decision
where the following was stated:
"Where
a consent order contains no admission, then the Tribunal makes no
finding or determination in relation to a prohibited
practice, as on
the papers, no prohibited practice is conceded by the respondent.
This type of order will therefore not bring
in its wake the
consequences for repeat offences and civil liability. No doubt these
areto the great advantage of the respondent,
and hence there may be
a reluctance to ever settle by way of an admission of guilt However,
there will be no immunity either,
because this would not constitute
a completed proceeding, the requirement that triggers the grant of
immunity, and this may count
heavily for some respondents, who wish
to resolve a complaint finally, and not be dogged by it in future,
in the face of a determined
and well resourced complainant, or by
other as yet undeclared putative complainants, who might emerge in
the future".
[23]
Assume however that this legal conclusion is wrong, should we take
further steps to protect Omnia's rights to bring a civil
claim in
the manner suggested?
[24]
We have decided that such a course of action is inappropriate for
the following reasons.
[25]
In the first place it is not competent for us to require the
Commission and Sasol to insert such a clause in their agreement
or
add it as a rider to the agreement ourselves. The nature of such
agreements, be they in terms of section 49D or otherwise,
is that
they are contracts between the parties. Whilst we can make
suggestions to the parties they do not have to adopt them.
(By way
of example we invited the parties to consider including appropriate
clauses to address our concerns over the monitoring
of the extensive
behavioural remedies and the parties have agreed to terms which have
been incorporated into the settlement agreement
as the second
addendum).
13
[26]
Further we have no power to add a rider to such agreement. Whilst we
have the discretion not to grant an order or to indicate
that we
will not do so unless certain terms are included, it is not
competent for us to impose our own additions when we confirm
such a
settlement. In this case we have asked the parties to respond to
Omnia's concerns and they have declined to amend the
agreement to
the extent sought to guarantee the right to bring the civil claim.
In fact as argued by Sasol, what Omnia seeks
is a waiver from it
that it will notexercise its rights, assuming it has them, to rely
on section 67(2) - it declines to do so.
We have no power to add
this term to the agreement without the contracting parties' consent.
[27]
It thus remains for us to consider refusing to grant the order of
confirmation because a term protecting Omnia from the possible
invocation of a section 67(2) defence was not included by the
parties.
[28]
Such an exercise of our discretion would be inappropriate. If we are
correct in our interpretation of the law such a clause
would be
superfluous. If we are wrong on the law, which we have not been
persuaded of - at best we are asked to take into account
that the
law on this point is uncertain - then we are being asked to include
a right into an agreement that the law may not permit
in its
absence. We are not here to act as lawmakers. If the law operates in
this fashion we cannot prevent its operation by refusing
to approve
settlement agreements unless such a term is inserted.
[29]
This would not be a proper exercise of our discretion as an
administrative tribunal, but would place us in the position of
lawmaker. The relief Omnia seeks would apply to any putative
litigant in respect of any order that has no admission of liability
attached to it and no section 67(2) waiver. It amounts to concluding
that as a matter of law an agreement of the present kind
cannot ever
be confirmed. Absent a finding by a higher court to the contrary and
in view of our own decisions which indicate
that Omnia is not
deprived of its rights it is not appropriate for us to insist that
the agreement must include what in the commercial
lawyers parlance
is a 'comfort clause'.
[30]
That would not be a proper exercise of our discretion. Nor if we
insisted on such a clause do the parties have to accept
its
inclusion. As we noted above this is a settlement agreement; if we
suggest a term the parties do not have to accept it and
the
consequences are that the agreement without confirmation would be of
no force and effect.
14
Given
that all submissions we have received, including from Omnia, are
that the terms of this agreement constitute an effective
remedy to
the competition concerns made out in the referrals it would be
irresponsible for us to adopt such a course, premised
not on
fairness or inappropriateness of the terms of the order, but a
particular apprehension about the law; an apprehension
which has no
express mention in the statute nor in decided case law.
[31]
The objections of Omnia are dismissed and we confirm the settlement
agreement with the two addenda (as explained above).
20
July 2010
Date
Norman
Manoim
Andreas
Wessels and Mbuyiseli Wladlanga concurring.
Tribunal
Researcher
:
I Selaledi
For
the Commission
:
Adv G Engelbrecht instructed by Cheadle
Thompson
& Haysom Inc.
For
Sasol Chemical Industries : Adv J Gauntlett SC with Adv A Cockrell
instructed
by
Bowman Gilfillan Attorneys
For
Omnia Fertiliser
:
Adv J Wilson instructed by Deneys Reitz Inc.
For
African Explosives
:
Adv M Wesley instructed by Deneys Reitz Inc.
For
Nutri-Flo : Adv I Moodley instructed by Livingstone Leandry Inc.
For
Yara South Africa
:
Adv J Pretorius instructed by Gerrit Coetzee
Attorneys
THE
COMPETITION
TRIBUNAL
OF SOUTH
AFRICA
(PRETORIA)
'
In
the matter between:
THE
COMPETITION COMMISSION OF SOUTH AFRICA Applicant
and
SASOL
CHEMICAL INDUSTRIES LIMITED Respondent
In
re:
CT
Case No: 45/CR/May06
THE
COMPETITION COMMISSION OF SOUTH AFRICA Applicant
and
SASOL
CHEMICAL INDUSTRIES LIMITED First Respondent
YARA
SOUTH AFRICA (PTY) LIMITED Second Respondent
AFRICAN
EXPLOSIVES AND CHEMICAL INDUSTRIES LIMITED Third Respondent
and
CT
Case No: 31/CR/May05
In
re:
THE
COMPETITION COMMISSION OF SOUTH AFRICA
and
SASOL
CHEMICAL INDUSTRIES LIMITED First Respondent
YARA
SOUTH AFRICA (PTY) LIMITED Second Respondent
OMNIA
FERTILISER LIMITED Third Respondent
SETTLEMENT
AGREEMENT
BETWEEN
THE COMPETITION COMMISSION AND
SASOL
CHEMICAL INDUSTRIES LIMITED IN RESPECT OF ALLEGED OF CONTRAVENTIONS
OF SECTIONS 8 AND 9 OF THE
COMPETITION ACT 89 OF 1998
The
Competition Commission and Sasol Chemical industries Limited hereby
agree
thai
application
be made to the Competition Tribunal for confirmation of this
Settlement Agreement as an order of the Tribunal, in terms
of
Section
58
read with section 27(1) of the Act. This agreement is concluded in
settlement of the allegations of abuse of dominance including
exclusionary conduct and price discrimination, as
further
detailed
herein,
referred
by
the Competition Commission to the Competition Tribunal.
1.
Definitions
1.1
.
"Act" means the
Competition Act 89 of 1998
, as amended;
1.2
"AECI”
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,
alternative}}/
principal
place
of
business, at 24, The
Woodlands,
Woodmead,
Sandton, South Africa;
1.3
"Affected
Assets"
means
Sasol Nitro's granular and liquid fertiliser blending facilities in
Durban, Bellvilie, Endicott, Kimberiey and Potchefstroom;
1.4
"Ammonia
Plant
“
means
Sasoi's ammonia production plants and/or facilities situated at
Sasofburg;
1.5
"Ammonium
Nitrate Based Fertilisers"
means
ammonium nitrate and derivative products used for fertilisers;
1.6.
"Ammonium Nitrate
Based
Explosives"
means ammonium nitrate and derivative products used for explosives;
1.7.
"ANS" means ammonium
nitrate
solution;
1.8.
"Average Price" means the 12 month
rolling
average
of
the monthly volume weighted average Ex-Works
price;
1.9
.
"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;
1.10.
"Commissioner* means the Commissioner of the Competition
Commission appointed in terms of section 22 of the Act;
1.11.
"Divestiture Conditions" means the conditions attaching to
the disposal of the Affected Assets set out in Annexure
"A"
read together with Annexure "B"
,
which
annexures
are both confidential;
1.12.
"Ex-Works"
means ex Sasol
Hiiro's
facilities
within the Gert Sibande
District
Municipality
as defined by incoterms 2000's abbreviation "EXW\ and added to
which is transport and logistics
costs
where
product is collected from the Premises outside Gert Sibande;
Incoterms "EXW" definition is as at the named place
where
the shipment is
available
to
the
buyer
loaded
or unloaded and with the seller not contracting for any
transportation;
1.13.
"LAN" means limestone ammonium nitrate;
1.14.
"Nitrogen Derivative Products" means Ammonia, ANS and ANS
in dilute solution;
1.15.
"Nutri-Flo" means Nutri-Ffo CC and Nutri-Fertiiiser 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,
Umhlali, Kwazulu-Natal, South Africa;
1.16.
"Nutri-Flo referral" means the Complaint Referral referred
to the Tribunal by the Commission under case number
31/CR/May05;
1.17.
"Omnia" means Omnia Fertiliser 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 Sioane Street, Epson
Downs,
Bryanston, South Africa;
1.18
.
"Premises"
means SCI's premises situated within the Gert Sibande District
Municipality and no more than 3 (three) Sasol
Nitro warehouses or
distribution facilities situated within a
radius
of
100 (one hundred) kilometres from Secunda and/or within a radius of
100 (one hundred) kilometres from Sasolburg;
1.19.
"Profert" means Profert
(Proprietary)
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 43 Ross Street,
Potchindustria, Potchefstroom;
1.20.
"Profert referral" means the Complaint Referral referred
to the Tribunal by the Commission under case number 45/CR/May06;
1.21.
"Sasol Nitro" is the division of Sasol Chemical industries
Limited which encompasses the business activities and
conduct which
are the subject of this Settlement Agreement;
1.22.
"SCI"
means Sasol Chemical Industries Limited, a company registered
and
incorporated in accordance with the iaws of the Republic of
South
Africa,
with its registered office, alternatively principal" place of
business, at 1 Sturdee Avenue, Rosebank, Johannesburg,
South Africa;
1.23
"Section
4 Settlement Agreement" means the Consent and Settlement
Agreement concluded between the Commission and SCI
dated
18
May 2009 and confirmed by the Tribunal as an order on 20 May 2009;
1.24
.
"Settlement
Agreement" means this settlement agreement
and
all annexure ,
thereto,
duiy signed and concluded between the Commission and SCi;
1.25.
"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, Mufayo Building, dti Campus,
77
Meintjies Street, Sunnyside, Pretoria;
1.26.
"Yara" means
Vara
(South
Africa) (Proprietary) Limited, a
company
previously
known
as
Kynoch Fertiliser (Proprietary) 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.
2.
The Nutri-Fio complaint investigation and the Commission's findings
2.1.
Nufri-Flo
lodged
a
compiaint with the Commission on 3 November 2003. in its complaint,
Nutri-Fio;
2.1.1.
alleged that SCI and its
competitors
acted
in
contravention of section 4 of the Act;
2.1.2.
contended that SCi, whiie dominant in the
market
for
the supply of LAN and ANS,
commuted
an
abuse
of its dominant position by
charging
excessive
prices for LAN and ANS;
2.1.3
compiained
of exclusionary conduct on the part of SCi in that SCi
pnced
its
products at a
level
that
left
Nutri-Fio no capacity to make a proper profit on resale;
2.1.4
alleged
that
this margin
squeeze
meant that Nutrf-Flo
could
trade
only
at a loss; and
2.1.5
stated
that
Sasol took deliberate steps to
prevent
Nutri-Fio
from
expanding
its
market and, as a
result,
its
market penetration has shrunk.
2.2
The Commission investigated the complaints and found
that
the
Respondents
had
contravened the Act The Commission accordingly resolved to refer the
complaints to the Tribunal, together with particulars
of further
instances of anti-competitive conduct engaged in by the respondents,
and SCI in particular.
2.3.
On 4 May 2005 the Commission referred the Nutrt-Fio Complaint to the
Tribunal under CT case number 31/CR/May05. The respondents
in the
Nutri-Flo referral are SCI, Omnia and Kynoch.
2.4.
The referral was subsequently amended by the Commission.
2.5
.
In
the Nutri-Flo referral, as amended, the Commission alleged that;
2.5.1
SCI,
Kynoch and Omnia had contravened section 4(1)(b) alternatively
section 4( 1 )(a) of the Act;
2.5.2
Sasol
had contravened section 8{c) alternatively section 8(d)(ii) of the
Act; and
2.5.3
Sasol
had also
contravened
section
8(a)
of the Act alternatively 8(c).
2.6
The Commission alleged that SCI charged excessive prices by a series
of stratagems
that
enabled
it
to sustain the
price
of ammonia
at
import parity
■
price,
inter alia through:
2.6.1.
paying AECl to close its local ammonia and urea production
facilities;
2.6.2.
shorting the
supply
of
Nitrogen
Derivative Products and LAN to the relevant domestic markets by
'balancing' the use of ammonia between fertiliser and
explosive
production and exporting the product at unfavourable prices;
2.6.3.
acting in concert with the remaining respondents over the supply of
Nitrogen Derivative
Products
and
LAN
to
sustain
the import parity
price
for
ammonia; and
2.6.4.
pricing Nitrogen Derivative Products by reference to the import
parity price of these products and LAN by reference to
the import
parity price of urea (though at a premium).
2.7.
The Commission contended that the prices charged by SCI to Nutri-Fio
for Ammonia, ANS and LAN were excessive when assessed
against or by
reference to one or other or aii of the
following
benchmarks:
2.7.1.
the
price
charged
to
the
other
respondents
for sales in general and, in
particular,
for
safes
into different regions of
South
Africa
(net
of transport and related costs);
2.7.2.
the price (net of transport and related costs) charged by SCJ to
customers other than Nutri-Flo,
especially
at
the
coast.
2.7.3.
the cost of production, especially, when
taking
account of
the
value of ammonia used in ANS and LAN production by reference to
criteria
such
as
SCI's own
realized
prices
for downstream coastal
sales
of
ammonia;
2.7.4.
the price charged by suppliers
other
than
SCI
at times when alternative wholesale supplies of ANS became
available;
2.7.5.
the price at
which
Uttrogen DerivaHwe Products,
LAN
and explosives were exported;
2.7.6
the
price charged to Nutri-Fio in
terms
of
the
September 2001 agreement when compared to the prices Nutri-Flo was
otherwise
charged;
and
2.7.7
the
price at which Nutri-Flo was supplied ANS by AECI once the
clause
prohibiting AECi's competition with Kynoch ceased to
operate.
2.8.
Accordingly, the Commission contended that, by
charging
an
excessive
price for Nitrogen Derivative Pro'ducts and LAN, SCI acted to the
detriment of manufacturers of fertilisers, Nutri-Flo
included, and,
directly or indirectly, the ultimate consumer.
2.9.
The Commission
alleged
further
that, in
order
to discipline
Nutri-Flo
and/or
exclude
Nutri Flo from the markets for the supply of fertilisers, SCI;
2.9.1.
in September 2003 and
shortly
after
the
filing by Nutri-Fio of a complaint, materially increased the price
of its fertiliser products;
2.9.2.
embarked upon a campaign to drive Nutri-Flo out of the markets for
the supply of fertilisers after Nutri-Flo' refused to
submit to the
demand that it exit the blending market;
2.9.3.
prevented Nutri-Flo from independently importing fertiliser
product,
urea
particularly, by threatening to withdraw the supply of a Key
input,
ANS;
2.9.4.
by committing itself to sell and then selling to the remaining
respondents on preferential terms concerning price and line
of
supply of LAN and product in the Nitrogen Derivative Products, SCi
prevented suppliers other than the respondents (including
Nutri-Flo)
from effectively competing with them in the retail market for the
supply
of
LAN.
2.10.
The Commission found that the pricing structure of wholesale and
retail prices effectively administered by SCI, together
with the
remaining respondents,
prevented
independent
blenders
and suppliers, Nutri-Flo included, from effectively competing and
expanding within the downstream fertiliser market.
2.11.
In consequence of
this,
the
Commission
alleged that SO had engaged in exclusionary conduct which had the
effect of lessening the capacity of competitors,
including
Nutri-Flo, to
supply
Mtrogen
Derivative
Products and LAN at lower
rates
Into
the
market and to expand their penetration of the
market.
2.12.
In these circumstances, the Commission contended that SCI's conduct
constituted a contravention of
section
8(c)
of the Act, as the anti-competitive effect was not outweighed by any
technological, efficiency or other pro-competitive gain,
in that
competition was lessened and there is thereby detriment to consumers
by the aforesaid effects on the structure of the
downstream market.
In the alternative, that by reason of the conduct described above,
SCI had contravened section 8(d)(ii)
of
the
Act.
2.13.
SCI settled the allegations of section 4 contraventions in the
Section 4 Settlement Agreement.
2.14.
The Commission continued to prosecute the Nutri-Flo referral in
respect of the section 8 complaints described more fully
above.
3.
The Profert complaint investigation and the Commission's findings
3.1.
In August 2004 Profert fifed a complaint against SC! alleging that
it had abused its dominance in the supply of LAN.
3.2.
Profert complained
that
SCI
had:
3.2.1.
charged discriminatory discounts
in
favour of Kynoch (Profert's competitor);
3.2.2.
refused to
supply
LAN
to Profert, and thus had limited the
ability
of
Profert to compete effectively and/or
expand
in
the fertiliser market.
3.3.
Accordingly, it was contended that Sasol had
contravened
sections
9(1), 8(c) and/or alternatively 8(d)(ii) of the
Competition Act.
3.4.
The Commission investigated the complaints and concluded
that
SCI
had contravened the Act as alleged. The Commission accordingly
decided to refer the complaints to the Tribunal.
3.5.
On 25 May 2006, the Commission referred the Profert complaint
against
SCI,
Kynoch and AECL No relief was sought against Kynoch and AECt.
3.6.
in the Profert referral, the Commission contended
that
3.6.1
the agreements, arrangements or understandings between Sasol and
AECl/Kynoch had the effect of constructing and dividing
the market
to make Sasol the exclusive supplier of LAN to the wholesale market
and the dominant supplier of LAN in the retail
market, in
contravention
of
section 4(1 )(b) alternatively 4(1 )(a)
of
the
Act;
3.6.2.
the agreements, arrangements or understandings by
which
SCI
committed itself to give and then gave Kynoch preference in price
and line of
supply
of
LAN amounted to an abuse of dominance as contemplated in section
8(c)
and/or
section
8d(ii) of the Act; and
3.6.3.
SCI was guilty of an abuse of dominance in terms of section 9 of the
Act by charging customers, including Profert, more
fopLAN than
it
charged Kynoch.
3.7.
The Commission abandoned the prosecution of the section 4
complainant in the profert referral.
3.8.
The Commission continued to prosecute the section 8 and 9 complaints
in the Profert
referral
3.9.
The Commission consolidated its allegations against Sasoi of abuse
of dominance in the Nutri-Fio and Profert complaints for
purposes of
prosecution.
4.
Settlement discussions
4.1.
Notwithstanding the Commission's allegations as outlined above, SCi
contends that it was not
engaged
in
any unlawful conduct in contravention of sections 8 and 9 of the
Act. Neither SCi nor the Commission makes any concessions
or
admissions with respect to their differing views.
4.2.
With a view to settling the Nutri-Fio and
Profert
referrals
of sections 8 and 9, the parties engaged on the following, which
they expect to result in a more competitive outcome.
That
SCI
would:
4.2.1.
sell Ammonium Nitrate Based Fertilisers on an E
x~Works
basis;
4.2.2.
commit not to differentiate in its
pricing
of
Ammonium Ni
trate
Based
Fertilisers, other than on standard commercial terms such as volume
and off-take commitments;
4.2.3.
dispose of the Affected Assets so as to give
practical
effect
to the above; and
4.2.4
cease
the Importation of ammonia on behalf of
third
parties.
4.3
The Commission
engaged
in
settlement negotiations on the basis
that
SCi
would
make
reasonable endeavours to settle with Nutri-Fio and
Profert,
5. Undertakings
5.1.
SCI undertakes, following the divestiture and disposal of the
Affected
Assets
as contemplated below, and in any event no later than 12 (twelve)
months after the' date on which
this
Settlement
Agreement
is confirmed by the Tribunal as an order or such later date as may
be agreed by the Commission or ordered by the Tribunal:
5.1.1.
to
sell
alt Ammonium Nitrate Based Fertilisers to its customers on an
Ex-Works
basis
from
the Premises;
5.1.2.
not to impose any restriction or obligation
upon
any
customer as regards the terms of resale of the abovementioned
fertiliser products;
5.1.3.
not to
differentiate
in
its pricing, other than on standard commercial
terms
such
as volume and off-take commitments;
5.1.4.
that any discounts and/or allowances granted shall be transparent
and available to ali customers willing and able to meet
such volume
and off-fake commitments; and
5.1.5.
without detracting from the
generality
of
the
foregoing:
5.1.5.1.
SCI shall be entitled to give discounts andfor other allowances for
reasons associated with volume
andfor
off-take
commitments,
as detailed in Annexure C;
5.1.5.2.
SCI shall be entitled to give discounts and/or allowances where
customers have been subject to specification deviation
and
supply
disruption.
5.2.
In
order to give practical effect to the undertakings contemplated in
5.1 above Sasol
Hiiro
hereby undertakes
and
commits to divest and dispose of the Affected Assets in accordance
with the Divestiture Conditions contained in Annexure A.
5.3.
Sasol undertakes,
within
twelve
months of the confirmation of this Settlement Agreement as an
order
of
the Tribunal, to house the Ammonia
Plant
and
business operations relating thereto as a business unit separate
from Sasol Nitro and with separately audited books of account,
such
that;
5.3.1.
this separate business unit wiii be responsible for the
operation'of
the
Ammonia Plant in Sasolburg and for the marketing of ammonia produced
at Sasolburg and supplied from Secunda;
5.3.2.
the executive management of the business unit will be separate from
that of the remainder of
Sasol
Nltro,
with
its own decision making power, separate audited
accounts
and
will
be incentivised
according
to
the
performance of the separate business unit; and
5.3.3
this
business
unit
wiii
seii ammonia on an arms
length
basis
to Sasol's
own operations and to third parties,
5.4
After the date on which this Settlement Agreement is confirmed by
the Tribunal as an order, and other than for internal use
within the
Sasol Limited group, SCI undertakes to;
5.4.1
cease ail importation of ammonia into the Republic of
South
Africa,
within a period of 25 months of confirmation of the Settlement
Agreement other than those imports on behalf of
third
parties
that may be occasioned due to supply and logistic disruptions and
plant maintenance shutdowns; and
5.4.2
consequentially
adjust
its
logistics infrastructure requirements.
5.5
To address concerns of possible unintended consequences which may
result
from
the undertakings set out in 5.1 to 5.4 above, SCI confirms
that,
save
to the extent specified herein, this Settlement Agreement
shall
not:
5.5.1.
unduly alter SCi's investment decisions with respect to ammonia
based fertilisers;
5.5.2.
result in SCi
unduly
limiting supply of
ammonia
and ammonia
nitrate
products
to
any of its customer(s); or
5.5.3
sell
ammonium
nitrate
explosives
info export markets at prices below
the Average Price in South
Africa.
5.6.
For the avoidance of doubt, it is recorded that SCl's entitlement to
make investment decisions and decisions relating to
the supply of
ammonia and nitrate products independently of the effect of this
Settlement
Agreement
is
not affected by the undertakings in 5.5.
5.7.
Confidential aspects of the undertakings contained in 5.1 to 5.5 are
contained in Annexure C.
6.
Administrative
penalty
No
administrative penalty-shall be payable in terms of the Act
and/or
in
terms of this Settlement Agreement.
7.
Settlement
SCI
confirms
that
It
has
engaged with the relevant complainants and it has agreed to the
terms of the settlement agreements with respectively, Profert
and
Nutri-Flo, subject to this Settlement Agreement being confirmed by
the Tribunal.
8.
Duration
This
Settlement Agreement shall come into effect on the date on which it
is confirmed by the Tribunal as an
order.
The
undertakings made herein shall
remain
binding upon
SCI
for a period of 10 (ten) years after the disposal of the Affected
Assets in terms of clause 5.2 hereof as read with the
Divestiture
Conditions contained in Annexure "A", after which such
undertakings shall lapse and be of no further
force or effect.
9.
Variations
9.1.
This settlement agreement may not be varied, provided tht SCI shall
be entitled, upon good cause, to make reasoned application
to the
Commission to waive, modify and/or substitute one or more of the
terms of this Settlement Agreement, which consent shall
not be
unreasonably withheld.
9.2.
in the event of the Commission and SCI
agreeing
upon
the
waiver, modification
andlor
substitution
of any aspect of this Settiement Agreement, the Commission and SCi
shaii make application to the Tribunal for confirmation
by it of
such waiver, modification
andhr
substitution
of any one or more terms of this Settlement Agreement
9.3.
For purposes of this Settlement
Agreement,
"good
cause" means circumstances that could not have reasonably been
foreseen by SCI and/or the Commission at the time
this Settlement
Agreement was entered
into.
.
10.
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
ail
proceedings between the Commission and SCi relating to alleged
contraventions of section 8 and 9 of the Act that are the
subject of
the Nutri-Fio referral and the Profert referral and which are the
subject of the Commission's investigations under
case numbers
2003Dec770 and 2004Aug1148.
DATED
at
Rosebank
on
this the
25
th
day
of
June
2010
Director of Sasol Chemical
Industries
Limited
Authorised
signatory for Sasol Chemical Industries Limited
DATED
at
Hyde
Park
on
this the
25
th
day
of
June
2010
Shan
Ramburuth
Commissioner,
Competition Commission
THE
COMPETITION TRIBUNAL OF SOUTH AFRICA
(PRETORIA)
In
the matter between:
THE
COMPETITION COMMISSION OF SOUTH AFRICA
Applicant
and
SASOL
CHEMICAL INDUSTRIES LIMITED
Respondent
In
re:
CT
Case No: 45/CR/May06
THE
COMPETITION COMMISSION OF SOUTH AFRICA
Applicant
and
SASOL
CHEMICAL INDUSTRIES LIMITED
First
Respondent
YARA
SOUTH AFRICA (PTY) LIMITED
Second
Respondent
AFRICAN
EXPLOSIVES AND
CHEMICAL
INDUSTRIES LIMITED
Third
Respondent
and
In
re:
CT
Case No: 31/CR/May05
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
Panel
N Manoim (Presiding
Member)
A Wessels (Tribunal Member); and
M Madlanga SC (Tribunal Member).
Heard
on
14
July 2010
Decided
on
DRAFT
ORDER
The
Tribunal hereby confirms the Settlement Agreement concluded by the
Competition Commission and the Respondent, annexed marked
"A",
as an order of the Tribunal in terms of section 58 as read with
section 27(1)
of the
Competition Act no. 89 of 1998
as
amended
("the
Act"), subject to the further order (to which the Competition
Commission and the Respondent have consented) that:
1.
Nothing in the Settlement Agreement shall be read as interfering
with the Respondent's obligations in terms of its current
ammonia
supply contracts with its customers, or as constituting an event of
hardship or force
majeure
in
terms of such contracts entitling the Respondent to cease or limit
its supply obligations to its customers in terms of such
contracts;
2.
Subject to any rights of the Respondent under section 67 of the Act,
nothing in the Settlement Agreement shall be read as depriving
a
prospective complainant of any right to submit a complaint to the
Commission to be addressed
under
the
Act;
3.
The terms of the Settlement Agreement do not detract from any right
of any person to to apply for a declaratory order in terms
of
section 58(1 )(a)(v) or (vi) of the Act.
Norman
Manoim
Presiding
Member
Concurring:
AWesseis
and M Madianga SC
The
terms the
of
the draft order attached are duly confirmed by the Applicant
and
Respondent
DATED
at
Rosebank
on
this the
16th
day
of
July
2010
Andre
de Ruyter
Sasol
Chemicals Industries Limited (the Respondent)
Authorised
signatory for Sasol Chemicals Industries Limited
DATED
at
Pretoria
on
this the
19th
day
of
July
2010
Shan
Ramburuth
Commissioner,
Competition Commission
ADDENDUM
TO THE SETTLEMENT AGREEMENT
1.
Further to the Settlement Agreement concluded by the Commission and
SCI and the undertakings made by SCI therein, SCI undertakes
to
provide the Commission with annual reports and such information as
the Commission may reasonably require regarding its compliance
with
the undertakings in clause 5 of the Settlement Agreement and in
clauses 3 to 6 of Annexure "C" thereto. This information
includes and is not limited to audited financial accounts and
supporting documentation in respect of such accounts.
2.
The Commission shall be entitled to request such reports,
information and supporting documentation referred to in clause 1
above at any time on reasonable notice.
3.
SCI undertakes to notify the Commission by way of a letter once its
obligations under clause 5.3 of the Settlement Agreement
have been
completed and to provide such information as the Commission may
reasonably require evidencing such implementation.
DATED
at
Rosebank
on
this the
16th
day
of
July
2010
Andre
de Ruyter
Sasol
Chemicals Industries Limited (the Respondent)
Authorised
signatory for Sasol Chemicals Industries Limited
DATED
at
Pretoria
on
this the
19th
day
of
July
2010
Shan
Ramburuth
Commissioner,
Competition Commission
competition
tribunal
South
Africa
Case
Numbers: 31/CR/May05 and 45/CR/MayQ6
15
July 2010
Competition
Commission
Per
email:
WendyM@compcom.co.za
;
SimonR@compcom.co.za
TembinkosiB@compcom.co.za
Cheadie
Thompson & Haysom
Per
email:
Doris@cth.co.za
Doris@cth.co.za
;
Sibonqile@cth.co.za
Bowman
Gilfillan
Per
email:
d.lotter@bowroan.co.za
;
l.mtanga@
bowman.co.za
Dear
All
Re:
Settlement Agreement between the Competition Commission
("Commission") and Sasol Chemical Industries Ltd ("Sasol")
in respect of alleged contraventions of
sections 8
and
9
of the
Competition Act of 1998
: case numbers 31/CR/May05 and 45/CR/May06
We
refer
to the hearing of the above matter which
was
held
on Wednesday, 14 July 2010.
The
panel is in principle satisfied with the terms of the settlement
agreement as amplified by the draft order handed up during
the
hearing.
We
have,
however, identified certain issues that first require your further
consideration and response, before we make a final determination
about whether to confirm the agreement:
1.
Draft
order:
For
the sake of completeness, we request that the draft order that was
handed up during the hearing be signed by all parties to
the
settlement agreement.
2.
Monitoring
mechanism of behavioural remedies:
We
have a concern regarding the monitoring aspect of the behavioural
undertakings by Sasol as contained in the settlement agreement.
We
note that the monitoring mechanisms which Mr. Brand of Sasol and Ms.
Mkwananzi of the Commission explained at the hearing
in response to
our queries do not form part of the signed settlement agreement.
We
therefore invite the parties to consider the insertion of
appropriate clauses in regard to the monitoring mechanism of the
behavioural remedies in the settlement agreement. We base this
request
inter
alia
on
the following considerations (i) given that the undertakings in the
settlement agreement will remain binding on Sasol for a
period of
ten years after the disposal of the affected assets, the responsible
persons at Sasol and/or the Commission overseeing
compliance with
these undertakings are likely to change over this period and thus
even though those currently involved in the
negotiations have a
clear understanding of these mechanisms later ones may not which may
lead to disputes; and (ii) certain of
Sasol's undertakings in our
view would not be transparent and therefore would not be detected
and effectively monitored by market
participants, for example
certain undertakings in the Confidential Supplementary Undertakings
contained in Annexure "C"
to the settlement agreement.
Given
that Sasol at the hearing provided undertakings in the above regard,
we are confident that the Commission and Sasol can
formulate
appropriate undertakings in regard to an effective monitoring
mechanism to be included, as an addendum, to the settlement
agreement. We ask that you consider providing us with such an
addendum and that if you do so, that it is duly signed by all
parties to the settlement agreement.
We
await your urgent consideration of this letter.
Kind
regards,
ipeleng
Seialedi
Researcher
On
behalf of the panel
Direct
Line: 012 394 3344
Fax
No: 012 394 4344
Email:
lpelengS@comptrib.co.za
(transmitted
electronically without signature)
1
Derived
from Nutri-Fio CC ('Nutri-Flo').
2
Derived
from Profert (Pty) Ltd ('Profert').
3
31/CR/May05
and 45/CR/May06 respectively.
4
The
settlement agreement is dated 25 June 2010 (see annexure I hereto).
5
AEL's
concerns relating to an existing ammonia supply agreement with
Sasol, were addressed by clause one of the first addendum
to the
settlement agreement (see annexure ii hereto).
6
Omnia
was represented in this hearing through the managing director of its
fertiliser division, Trevor Grant.
7
Clause
4.1 of the settlement agreement.
8
See
affidavit of Grant, paragraph 7.
9
83/CR/Oct04.
10
62/CAC/Apr06.
11
The
Court's decision turned on the wording of
section 49
D which says an
application under that section is competent
"If,
during, on or after completion of the investigation of a complaint
..."
The
Court held that the Tribunal was wrong to interpret 'after
completion of the investigation of a complaint' to include the
period after a complaint has been referred. Hence a settlement
agreement made after a referral although competent is not made
in
terms of that section.
12
Paragraph
2 of the first addendum. The other right under
section 67
is the
right under subsection (1) to raise prescription. Notwithstanding
the express reservation of the
section 67
rights the addendum goes
on to state that nothing in the settlement agreement detracts from
the right of any person to apply
for a declaratory order under
section 58(1){a)(v) or (vi) of the Act.
13
The
second addendum is annexure HI hereto. Our letter setting out our
concerns and reasons for them is annexed to this decision,
marked
annexure IV.
14
As
anxious as Omnia is about preserving its rights, so is Nutri Flo as
one of the original complainants about protecting it's
- it has
urged us to grant the order because a settlement it has with Sasol
depends on the confirmation of this order.