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[2011] ZACT 51
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Competition Commission v Rand Merchant Bank, a division of First Rand Bank Ltd (44/CR/Jun11) [2011] ZACT 51; [2011] 2 CPLR 286 (CT) (14 July 2011)
COMPETITION
TRIBUNAL
REPUBLIC OF SOUTH
AFRICA
Case No: 44/CR/Jun11
In the matter
between:
The
Competition Commission
…........................................................................
Applicant
and
Rand
Merchant Bank, a division of First Rand Bank Limited
…..............................
Respondent
Panel:
N Manoim (Presiding Member), Y Carrim (Tribunal Member), and A
Wessels (Tribunal Member)
Heard
on : 15 June 2011
Decided
on : 14 July 2011
Order
The Tribunal hereby
confirms the order as agreed to and proposed by the Competition
Commission and the respondent, annexed hereto
marked "A".
Presiding
Member
N
Manoim
Concurring:
Y
Carrim and A Wessels
IN
THE COMPETITION TRIBUNAL OF SOUTH AFRICA HELD IN PRETORIA
CT
Case No.
44/CR/Jun11
CC
Case No. 2008Oct404S
In
the
matter between:
THE
COMPETITION COMMISSION
…...........................................................
Applicant
and
RAND
MERCHANT BANK, A DIVISION OF
FIRSTHAND
BANK LIMITED
…................................................................
Respondent
In
re:
COMPETITION
COMMISSION
…..................................................................
Applicant
and
NOORDWES
KO-OPERASIE LIMITED
….............................................
First
Respondent
RAND
MERCHANT BANK, A DIVISION OF
FIRSTRAND
BANK LIMITED
…......................................................
Second
Respondent
CONSENT
AGREEMENT IN TERMS OF SECTION 49D READ WITH SECTION S8(l)(a)(iii) AS
READ WITH SECTION 58(1)(!>) OF THE COMPETITION ACT,
1998 (ACT NO.
89 OF 1998), AS AMENDED, BETWEEN THE COMPETITION COMMISSION AND RAND
MERCHANT BANK, A DIVISION OF FIRSTRAND BANK
LIMITED IN RESPECT OF AN
ALLEGED CONTRAVENTION OF
SECTION 4(l)(b)(H)
OF THE
COMPETITION ACT,
1998
The
Commission
and
FirstRand
hereby
agree that application be made to the
Tribunal
for
the confirmation of this
Consent
Agreement
in
terms of
section 58
(l)(a)(iii) as read with section 58(l)(b) of the
Competition Act, 1998 (Act No. 89 of 1998), as amended, on the terms
set ont below:
1.
Definitions
For
the purposes of this
Consent
Agreement
the
following definitions shall apply:
1.1.
"Act
means
the Competition Act, 1998 (Act No. 89 of 1998), as amended;
1.2.
"Agreement"
means
the agreement concluded between NWK. and RMB in April 2005;
1.3.
"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 1
st
Floor,
Mulayo Building (Block C), the dti Campus, 77 Meintjies Street,
Sunnyside, Pretoria, Gauteng;
1.4.
"Commissioner"
means
the Commissioner of the
Commission,
appointed
in terms of section 22 of the Act;
1.5.
"Complaint*
means
the complaint under case number 2008Oct4045 initiated by the
Commissioner
in
terms of section 49B of the
Aci
>
including
a complaint concerned with allegations of market allocation in terms
of section 4(l)(b)(ii) of the Act initiated on 4
May 2009;
1.6.
"Consent Agreement"
means
this agreement duly signed and concluded between the
Commission
and
FirstRand;
1.7.
"FirstRand"
means
FirstRand Bank Limited, a company registered and incorporated in
accordance with the laws of the Republic of South-Africa
with
registration number 1929/001225/06 and with its registered office at
1st Floor, 4 Merchant Place, Sandton, 2146, South Africa;
1.8.
"NWK"
means
Noordwes Ko-operasie Limited, a company registered and incorporated
in accordance with the laws of the Republic of South-Africa
with
registration number 1998/007577/06 and with its registered address,
alternatively principal place of business at 81 Scholtz
Street,
Ltchtenbm-g, 2740, South-Africa;
1.9.
"Parties"
means
the
Commission
and
FirstRand;
1.10.
"Respondents"means
both
FirstRandmdNWK;
1.11.
"RMB"
means
the grain desk of Rand Merchant Bank, a division of
FirstRand
and
with its registered address, alternatively principal place of
business at 1 Merchant Place, c/o Fredman Drive and Rivoma Road,
Sandton, 2196, South Africa.
RMB
is
a diversified financial services brand encompassing investment
banking, fund management, private wealth management and advisory
services.;
1.12.
"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 3
rd
Floor,
Mulayo building (Block C), the dti Campus, 77 Meintjies Street,
Surmyside, Pretoria, Gauteng.
2.
The
Complaint and Complaint Investigation
2.1.
During October 2008 the Commission initiated a complaint against the
Respondents in respect of allegations that the Respondents
had
contravened section 4(l)(b)(i) of the Act in that they engaged in
price fixing and fixing of trading conditions.
2.2.
During May 2009, the Commission extended the complaint to include
allegations that the Respondents divided the market in
which they
compete by allocating territories and/or customers in contravention
of section 4(i)(b)(ii).
2.3.
The Commission conducted its investigation and concluded that:
2.3.1.
although
the
agreement
was
predominantly an agreement concerned with the relationship between a
supplier of storage services and its customer, clause
4.4 of the
agreement
was
incidentally capable of horizontal application between
RMB
and
NWK
to
the extent that
RMB
and
NWK
are
both engaged in the business of trading grain on the South African
Futures Exchange (SAFEX) and in the physical market for
the trading
of grain.
2.3.2.
Clause 4.4 of the
agreement
included
an undertaking on the part of
FirstRand
that
RMB
would
not sell 140 000 tons of grain relocated to
non-NWK
silos
within South Africa or Botswana in the period between 29 April 2005
and 1 May 2007.
2.3.4.
Clause 4.4 of the agreement constituted a contravention of section
4(l)(b)(ii) of the Act.
2.4.
In coming to its conclusion, the
Commission
took
into account that the pretext and essence of the agreement was that:
2.4.1.
RMB
had
stored 450, 000 tons of grain at various
NWK-ov/md
siios
in and during 2004 and 2005;
2.4.2.
the tonnage stored represented close to 47 percent of ail grain
stored in the
NWK
silos;
2.4.3.
NWK
realised
that it would face capacity constraints in circumstances where a
bumper crop was expected in the 2005 harvest season
and that
NWK
would
not have been in a position to take in grain from farmers during the
harvest season in the absence of an arrangement with
RMB;
2.4.4.
NWK
approached
RMB
to
find a mutually acceptable solution to the capacity constraints
faced by
NWK;
and
2.4.5.
the result of discussions on this score was the agreement.
2.5.
The
Commission
found
that the
agreement
provided
for certain arrangements to give effect to the intention to regulate
the vertical relationship between
NWK
and
RMB:
2.5.1.
172 902 tons of grain were to be relocated from over-utilised siios
to alternative
NWK-owned
silos
that had surplus capacity;
2.5.2.
127, 864 tons of grain would be sold by RMB to NWK;
2.5.3.
67, 000 tons of grain would be exchanged with
NWK
grain
in alternative NWK storage locations;
2.5.4.
140, 069 tons of grain would be moved by RMB to silos not owned by
NWK;
2.5.5.
RMB
would
deliver and store a further 20, 000 tons of grain at
NWJCs
Kameel
Silo; and
2.5.6.
RMB
granted
NWK
the
right to purchase
RMB
grain
for the purpose of on-selling such grain to third parties.
2.6.
The
Commission
took
a decision to refer to the
Tribunal
its
complaint that the
Respondents,
through
the inclusion of clause 4.4 in the
agreement,
had
engaged in market allocation in contravention of section 4(l)(b)(ii)
of the
Act,
on
the basis that the undertaking contained therein had the capacity to
find horizontal application between the
Respondents,
2.7.
The Commission decided not to refer to the
Tribunal
the
remainder of the complaint.
3.
Statement
of conduct by RMB
3.1.
RMB
admits
that:
3.1.1.
although
the predominant nature of the
agreement
was
a vertical one (i.e. an agreement entered into between a company and
its customer), clause 4.4 thereof may be interpreted
to fmd
horizontal application (I.e. an agreement entered into between
competitors);
3.1.2.
if the agreement is so interpreted, then the effect of clause 4.4 of
the
agreement
is
that the
Respondents
entered
into an agreement to divide markets by allocating territories; and
3.1.3.
if so read, clause 4.4 of the
agreement
falls
within the strict interpretation and also strict liability created
by section 4(l)(b)(ii) regardless of whether the transaction
had an
effect on competition.
4.
Administrative
Payment
4.1.
Having regard to the provisions of sections 58(l)(a)(iii) as read
with sections 59(l)(a), 59(2) and 59(3) of the Act, JRMB
accepts
that a contravention, of section 4(i)(b)(ii) may lead to the
imposition of an administrative penalty where the
Tribunal
deems
it appropriate.
4.2.
The parties have agreed that RMB will pay an administrative penalty
in the amount of R 2.1 million (two million one hundred
thousand
rand).
4.3.
This amount constitutes 3% (three per cent) of the value of grain
affected by clause 4.4 of the
agreement.
4.4.
RMB
will
pay the amount set o\it in paragraph 4.2 above to the
Commission
within
6 (six) months from the date of confirmation of this
Consent
Agreement
by
the
Tribunal.
4.5.
This payment shall be made into the
Commission's
bank
account, details of which are as follows:
Bank
name:
Absa
Bank
Branch
name:
Pretoria
Account
holder:
Competition
Commission Fees Account
Account
number:
4050778576
Account
type:
Current
Account
Branch
Code:
323
345
4.6.
The payment will be paid over by the
Commission
to
the National Revenue Fund in accordance with section 59(4) of the
Act.
5.
Agreement
Concerning Future Conduct
5.1.
RMB
agrees
to fully cooperate with the
Commission
in
relation to the prosecution of the complaint referral. Without
limiting the generality of the foregoing,
RMB
specifically
agrees to:
5.1.1.
Testify in the complaint referral (if any) in respect of alleged
contraventions covered by tins
Consent
Agreement;
and
5.1.2.
To the extent that it is in existence, provide evidence, written or
otherwise, which is in its possession or under its
control,
concerning the alleged contraventions contained in this
Consent
Agreement.
5.2.
RMB
agrees
that it will in future refrain from the provision of contractual
undertakings that have the potential to constitute contraventions
of
section 4(i)(b)oftheAct.
5.3.
RMB
shall
develop, implement and monitor a competition law compliance
programme incorporating corporate governance designed to ensure
that
its employees, management, directors and agents do not engage in
future contraventions of the
Competition Act. In
particular,
RMB
shall:
5.3.1.
draft and implement a competition policy and compliance programme;
5.3.2.
provide training on competition law compliance on issues
particularly relevant to
RMB
and
its employees and officials;
5.3.3.
provide training on competition law compliance to all persons and/or
officials employed by RMB after the confirmation of
this
Consent
Agreement
by
the Tribunal;
5.3.4.
update the competition policy and training annually to ensure
RMB*s
continued
compliance with the Act.
5.4.
RMB
shall
submit a copy of such compliance programme to the Commission within
60 days of the date of confirmation of the
Consent
Agreement by
the
Tribunal.
6.
Full
and Final Settlement
This
agreement, upon confirmation as an order by the
Tribunal,
is
entered into in full and final settlement and concludes all
proceedings between the
Commission
and
RMB
relating
to any alleged contravention by the
Respondents
of
the Act that is the subject of the
Commission's
investigation
under case no 2008OCT4045.
Dated
and signed at
Sandton
on
the
17
th
day
of
May
2011
For
the Rand Merchant Bank
Chief
Executive Officer
For
the Commission
Competition
Commissioner
Pretoria,
3 June 2011