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[2011] ZACT 92
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Competition Commission v OVK Operations Ltd (43/CR/Jun11) [2011] ZACT 92; [2012] 1 CPLR 104 (CT) (9 November 2011)
REPUBLIC
OF SOUTH AFRICA
Case
No: 43/CR/Jun11
In
the matter between:
The
Competition Commission
Applicant
and
OVK
Operations Ltd
Respondent
Pane!
A
Wessels (Presiding Member), M Mokuena (Tribunal
Member),
and A Ndoni (Tribunal Member)
Heard
on :
09
November 2011
Decided
on :
09
November 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
A
Wessels
Concurring:
M
Mokuena and A Ndoni
IN
THE
COMPETITION
TRIBUNAL
OF
SOUTH
AFRICA
HELD
IN PRETORIA
CT
Case No. 43/CR/Jun11
CC
Case No. 2009Mar4349
In
the matter between:
THE
COMPETITION COMMISSION Applicant
and
OVK
OPERATIONS LIMITED 4
th
Respondent
In
re:
THE
COMPETITION
COMMISSION
Applicant
and
AFGRI
OPERATIONS LIMITED
1
st
Respondent
SENWES
LIMITED 2
nd
Respondent
NWK
LIMITED 3
rd
Respondent
OVK
OPERATIONS LIMITED
4
th
Respondent
SUIDWES
(PTY)
LIMITED
5
th
Respondent
VRYSTAAT
KOOPERASIE BEPERK
6
th
Respondent
OVERBERG
AGRI (PTY) LIMITED
7
th
Respondent
DIE
HUMANSDGRPSE KOOPERASIE BEPERK
8
th
Respondent
SENTRAAL-SUiD
KOOPERASIE BEPERK
9
th
Respondent
GWK
LIMITED
10
th
Respondent
KAAP
AGRI BEDRYF LIMITED 11* Respondent
MGK
BEDRYFSMAATSKAPPY
(PTY)
LIMITED 12
th
Respondent
TUINROETE
AGRI BEPERK
13
th
Respondent
MOREESBURGSE
KORINGBOERE
(EDMS)
BEPERK
14
th
Respondent
TWK
LANDBOU BEPERK
15
th
Respondent
NTK
LIMPOPO AGRIC BEPERK
16
m
Respondent
THE
GRAIN SILO INDUSTRY (PTY) LIMITED
17
th
Respondent
CONSENT
AGREEMENTTERMS OF SECTION 49D READ WITH SECTION 58(1)(a
)(iii)
AND 58 (1) (b) OF THE COMPETITION ACT, 1988 (ACT NO.89 OF 1998), AS
AMENDE, BETWEEN THE COMPETITION COMMISSION (“THE
COMMISSION”)
AND VRYSTAAT
KOOPERASIE
BEPERK (“OVK”), IN RESPECT OF AN ALLEDGED CONTRAVENTION
OF SECTION* (1)(b)(i) OF THE COMPETITION ACT, 1998
("THE ACT").
The
Commission
and
OVK
hereby
agree that application be made to the
Tribunal
for
the confirmation of this
Consent
Agreement
in
terms of section 58 (1}(a)(iii) as read with section 58(1)(b) of the
Competition Act, 1998 (Act No. 89 of 1998), as amended,
on the terms
set out be low;
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 1988), as amended;
1.2
.
"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;
1.3.
'Commissioner'
means
the Commissioner of the Commission, appointed in terms of section 22
of the Act;
1.4.
"Complaint'
means
the complaint under case number 2009Mar4349 initiated by the
Commissioner in terms of section 49B of the
Act,
including
a complaint concerned with allegations of price fixing in terms of
section 4(1)(b)(i) of the Act initiated on 17 March
2009 as well as
an expanded initiation on 25 May 2010 after the decision was made to
include all the members and shareholders
of the Grain Silo Industry;
1.5.
"Consent
Agreement"
means
this agreement duly signed and concluded between the Commission and
OVK;
1.6.
"Grain
S//o
Industry
(Pty) Ltd"
is
a private company duly incorporated in accordance with the company
laws of the Republic of South Africa, having its registered
offices
at Lynwood Corporate Park, Alkantrantstraat, Lynwood Manor,
Pretoria, Gauteng Province. The GSI, amongst others, represents
its
members in public forums wherein matters related to the storage and
trading of grain and oilseeds are discussed and provides
specialist
research services that members may request on an ad-hoc basis. The
GSI represents its constituent members in interactions
with the
Agricultural Products Division of the Johannesburg Stock Exchange
(the "APD" previously "SAFEX").
1.7.
"OVK"
means
OVK Operations Limited, a company registered and incorporated in
accordance with the taws
of
the
Republic of South-Africa with registration number 1999/004069/06 and
with its registered
office,
in
the alternative its main place of business, at 19 Dan Pienaar
Street, Ladybrand, Free State, 9745;
1.8.
"Parties"
means
the Commission and OVK;
1.9.
"Respondent"
means
for purpose's of this agreement OVK;
1.10.
"Respondents"
means
Respondents one (1) to seventeen (17) described
above;
1.11.
"SAFEX"
means
the the South African Futures Exchange (currently known as the
Agricultural Products Division of the Johannesburg Stock
Exchange)
which was established to provide market participants with a price
determination mechanism and a price risk management
facility through
which they can manage their exposure to adverse price movements in
the underlying commodity.
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,' MuJayo building (Block C), the dti Campus, 77 Metntjies
Street, Sunnyside, Pretoria, Gauteng.
2.
The
Complaint and
Complaint
Investigation
2.1.
On 17 March 2009 the
Commissioner
initiated
a complaint against Afgri Operations Limited ("Afgri"),
Senwes Limited ("Senwes"), Boord
-Wes
Kooperasie
Limited ("NWK"), OVK Operations Limited fOVK"),
Suidwes (Pty) Limited ("Suidwes"), Vrystaatse
Kooperasie
Limited ("VKB") and the Grain Silo Industry ("GSI")
for
alleged
contravention of section 4(1)(b)(i) of the Act, in the form of
fixing day storage tariffs for grain stored in silos.
2.2.
The investigation revealed that the storage rate is agreed to and
assented to not only by the entities against whom the original
complaints initiation was made, but by ail members and shareholders
of
GSI.
In
the circumstances, on 25 May 2010 the
Commissioner
expanded
the investigation to refer to ail seventeen (17) respondents.
2.3.
The
Commission
conducted
its investigation and concluded that:
2.3.1.
the
respondents
and
GSI have contravened section 4(1)(b)(i) of the Act. The essence of
the conduct complained of is that the respondents and
GSI
have
contravened section 4(1)(b){i) of the Act in that they fix the
prices of the daily storage tariff for the storage of
grain.
This
is done for application throughout the Republic. The first to
sixteenth
respondents
are
all former cooperatives who own grain' storage silos and provide
other agricultural services and are competitors in the market
for
grain storage.
2.4.
The
Commission
found
that:
2.4.1.
Notwithstanding the fact that they are competitors, the first to
sixteenth
respondents
are
all
shareholders or members of the
GSL
Although
the
GSI
is
a private company, it amounts to an industry association for members
of the grain storage industry.
SAFEX
placed
the onus for the determination of the storage rate on the
GSI
on
the basis that it had the necessary knowledge and understanding of
the costs involved in providing storage. Until 2008,
SAFEX
requested
the standardised tariff from the GS/"on an annual basis. In
2008, as Is set out beiow, the
GSf
declined
to provide the standardised storage tariff to
SAFEX
any
longer on account of the
Commission's
contentions
that if and its members were contravening section 4(1)(b)(i) of the
Act.
2.4.2.
It was the
GSI's
technical
committee that was responsible for fixing the daily storage tariff
on behalf of the
GSI
and
its members, in response to requests from
SAFEX,
the
GSI
consulted
its shareholders. The shareholders submitted individual proposals as
to the appropriate storage rate to
GSI.
These
rates were collated and evaluated by the
GSf's
technical
committee, the members of which are,from competing silo companies.
The technical committee then decided on a rate and
this was then
submitted to
SAFEX
on
behalf
of
GSt
and
its shareholders.
2.4.3.
The essence of the conduct complained of is that the daily storage
tariff proposed. by
GSI
is
agreed to and assented to by all of the respondents. Given that the
first to sixteenth respondents are ail competitors in the
provision
of storage services, the joint determination of the daily storage
rate amounts to prohibited price fixing in that it
quite simply
amounts to an agreement between firms in a horizontal relationship
for the direct fixing of storage prices.
2.4.4.
The manner in which the
SAFEX
storage
tariff is determined is, in the Commission's view, restrictive of
competition. In addition, the storage tariff determined
for
SAFEX
purposes
has been used to determine storage fees in respect of sales
transactions in the physical market. This amount to collusion.
2.5.
The
Commission
took
a decision to refer to the
Tribunal
its
complaint that is described above.
Statement
of conduct by OVK
OVK
admits that it participated, as a member of the GSI, in the fixing
of the daily grain storage tariff in contravention of section
4(1)(b)(i) of the Act as described above.
Administrative
Penally
Having
regard to the provisions of sections 58(1)(a)(fii) as read with
sections 59(1 )(a), 59(2) and 59(3) of the Act, OVK accepts
that a
contravention of section 4(1)(b)(i) may lead to the imposition of an
administrative penalty where the
Tribunal
deems
it appropriate.
The
parties have agreed
that
'OVK
will pay an administrative penalty in the amount of R 375 615.
This
amount constitutes 4% (four per cent) of the total grain silo
storage turnover for the 2009 financial year.
OVK
will pay the amount set out in paragraph 4.2 above to the
Commission
within
two 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.
OVK
agrees
to fully cooperate with the
Commission
in
relation to the prosecution of the complaint referral. Without
limiting the generality of the foregoing,
OVK
specifically
agrees to:
5.1.1.
Testify in the complaint referral (if any) in respect of alleged
contraventions covered by this
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.
OVK
agrees
that it will in future refrain from participating in activities that
contravene section 4(1}(b) of the Act
5.3.
OVK
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,
OVK
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
OVK
and
its
employees and officials;
5.3.3.
provide training on competition faw compliance to all relevant
persons and/or officials employed by
OVK
after
the confirmation of this
Consent
Agreement
by
the Tribunal;
5.3.4.
update the competition policy and training annually to ensure
OVK's
continued
compliance with the Act
5.4.
OVK
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 info in full and finai settlement and concludes all
proceedings between the
Commission
and
OVK
relating
to any alleged contravention by the
Respondents
of
the Act, namely the fixing of the daily grain silo storage tariff,
that is the subject of the
Commission's
investigation
under case no 20Q9MAR4349.
Dated
and signed at Ladybrand on the 26
th
day of September 2011.
For
OVK
Managing
Director
For
the Commission
Competition
Commissioner