Competition Commission v Afrisam (South Africa) (Pty) Ltd (93/CR/Nov11) [2011] ZACT 98; [2012] 1 CPLR 53 (CT) (16 November 2011)

80 Reportability

Competition Law

Brief Summary

Competition — Consent agreement — Competition Commission and Afrisam (South Africa) (Pty) Ltd entered into a consent agreement regarding alleged contraventions of the Competition Act — The Competition Commission initiated a complaint against Afrisam and others for collusion and market manipulation following the withdrawal of a previous exemption allowing a lawful cartel — The Tribunal confirmed the consent agreement as an order, reflecting the parties' agreement to resolve the matter without further litigation.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings took place before the Competition Tribunal of South Africa and concerned an application for the confirmation of a consent agreement as an order of the Tribunal in terms of section 49D of the Competition Act 89 of 1998 (as amended), read with sections 58(1)(a)(iii) and 59(1)(a).

The parties were the Competition Commission (as applicant) and AfriSam (South Africa) (Pty) Ltd (as respondent). The matter was heard and decided on 16 November 2011 by a panel comprising A Wessels (Presiding Member), M Mokuena, and A Ndoni.

The procedural history reflected in the consent agreement records that the Commissioner initiated a complaint on 2 June 2008 (Commission case number 2008Jun3769) against several cement industry participants, including AfriSam, for alleged contraventions of the Competition Act. Following an investigation that included search-and-seizure operations and subsequent engagements between AfriSam and the Commission, the Commission and AfriSam reached a settlement embodied in a consent agreement, which they presented to the Tribunal for confirmation.

The general subject-matter of the dispute related to alleged collusive conduct in the cement industry, specifically indirect price fixing and market division through the allocation of market shares, addressed under sections 4(1)(b)(i) and 4(1)(b)(ii) of the Act. The Tribunal’s decision in this report is confined to confirming the settlement terms agreed between the Commission and AfriSam.

2. Material Facts

The consent agreement recorded background features of the South African cement industry, including that for many years (dating back to the 1940s) cement producers operated under exemptions that permitted a lawful cartel structure. This structure included institutional arrangements such as centralised sales and distribution entities and industry bodies. The exemption was withdrawn in 1995, with producers afforded time until September 1996 to terminate the lawful cartel arrangements.

The Commission’s complaint was initiated on 2 June 2008 against PPC, Lafarge, AfriSam, NPC, and Slagment for alleged contraventions of the Act. On 20 November 2010, the Commissioner amended the complaint to include an alleged contravention of section 4(1)(a) by the cement producers. The consent agreement further recorded that, after obtaining warrants, the Commission executed search-and-seizure operations at the premises of the cement producers on 24 June 2009, and that on 7 August 2009 PPC applied for and was granted conditional immunity under the Commission’s Corporate Leniency Policy.

The Commission’s investigation, as summarised in the consent agreement, indicated that following the withdrawal of the lawful cartel exemption, cement producers reached an understanding to continue targeting market shares in the SACU region. After a period of price competition described as a price war between 1996 and 1998, the producers allegedly held meetings in or between 1997 and 1998 aimed at stabilising the market. These meetings were said to have culminated in an agreement addressing market shares and pricing parameters, as well as limiting marketing and distribution activities and discounting practices.

A material component of the alleged arrangements described in the consent agreement was the exchange of detailed sales data through the Cement and Concrete Institute (C&CI) and an appointed audit firm. The cement producers allegedly submitted monthly sales data using agreed templates (Schedules A–J), received aggregated data, and used this to monitor market shares by region and other categories. The consent agreement recorded that additional weekly exchanges of total regional sales data were agreed in 2007, and that the information exchange ended in 2009.

In relation to settlement, the consent agreement recorded that AfriSam’s senior board members contacted the Commission after becoming aware of the investigation, conducted an internal investigation, and approached the Commission when that internal investigation revealed that former employees had been involved in conduct contravening the Act. A first meeting to discuss a consent agreement occurred on 7 June 2011, and after further engagement the parties reached consensus on settlement terms on 20 September 2011, later reduced to the written consent agreement presented to the Tribunal.

AfriSam made explicit admissions in the consent agreement. It admitted that it entered into agreements and arrangements (and subsequent understandings) with other cement producers that had the effect of indirectly fixing cement prices in contravention of section 4(1)(b)(i) and of dividing the cement market through the allocation of market shares in contravention of section 4(1)(b)(ii).

3. Legal Issues

The central legal question before the Tribunal, as reflected by the form of the decision and the statutory basis invoked, was whether the Tribunal should confirm the consent agreement concluded between the Commission and AfriSam as an order of the Tribunal in terms of section 49D, read with the Tribunal’s remedial and penalty powers under sections 58 and 59 of the Act.

The dispute, in the manner it came before the Tribunal, primarily concerned the application of law to an agreed outcome rather than the adjudication of contested facts. The consent agreement contained admissions by AfriSam and agreed remedial terms, so the Tribunal was not required (on the face of this report) to resolve factual disputes regarding liability through contested evidence. The legal character of the matter was therefore administrative and confirmatory: the Tribunal’s function was to consider the parties’ agreement and to confirm it as an enforceable order.

4. Court’s Reasoning

The Tribunal’s reasons are expressed succinctly in the order. The panel confirmed “the order as agreed to and proposed by the Competition Commission and the respondent,” attaching the consent agreement as “Annexure A.” The reasoning reflected in the report is therefore that the Tribunal accepted the parties’ agreed resolution and exercised its statutory power to make the agreement an order of the Tribunal.

The consent agreement itself set out the legal framework under which confirmation was sought, namely section 49D (consent agreements) read with sections 58(1)(a)(iii) and 59(1)(a) (administrative penalties). Within that framework, the agreement recorded AfriSam’s admissions of contraventions of sections 4(1)(b)(i) and 4(1)(b)(ii), and stipulated remedial undertakings and an administrative penalty. By confirming the consent agreement, the Tribunal made those undertakings and the penalty enforceable as an order.

The agreement also contained evaluative components agreed between the parties, including the quantification of the administrative penalty as 3% of AfriSam’s annual turnover for cement in the SACU region for the financial year ended 31 December 2010, the structured payment schedule over three years, and forward-looking compliance and cooperation commitments. The Tribunal, by confirming the agreement, adopted these agreed measures without adding further independent analysis in the text of the reported decision.

5. Outcome and Relief

The Tribunal confirmed the consent agreement between the Competition Commission and AfriSam as an order of the Tribunal on 16 November 2011.

The confirmed order incorporated, among other terms, AfriSam’s obligations to refrain from prohibited conduct, to circulate an internal summary of the consent agreement to managers and directors within 30 days, and to develop and implement a competition law compliance programme and submit it to the Commission within 90 days.

The order further incorporated an administrative penalty of R124,878,870.00, payable in six equal bi-annual instalments of R20,813,145.00 over a period of three years, with the first instalment due in February 2012, and to be paid into the Commission’s specified bank account for onward payment to the National Revenue Fund in terms of section 59(4).

No costs order is recorded in the reported text.

Cases Cited

No cases are cited in the reported decision or in the attached consent agreement.

Legislation Cited

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

Maintenance and Promotion of Competition Act 96 of 1979 (repealed), referenced in relation to the former Competition Board and prior exemptions.

Rules of Court Cited

No rules of court are cited in the reported decision or in the attached consent agreement.

Held

The Competition Tribunal confirmed, as an order of the Tribunal, the consent agreement concluded between the Competition Commission and AfriSam (South Africa) (Pty) Ltd in relation to admitted contraventions of section 4(1)(b)(i) (indirect price fixing) and section 4(1)(b)(ii) (market division through allocation of market shares) of the Competition Act 89 of 1998. The order gave effect to agreed remedial undertakings, a compliance programme obligation, cooperation commitments, and an administrative penalty of R124,878,870.00 payable in instalments.

LEGAL PRINCIPLES

A consent agreement concluded between the Competition Commission and a respondent in respect of alleged prohibited practices may be made binding and enforceable by being confirmed as an order of the Competition Tribunal under section 49D of the Competition Act 89 of 1998, read with the Tribunal’s powers under sections 58 and 59.

Agreements or arrangements between competitors that have the effect of directly or indirectly fixing prices contravene section 4(1)(b)(i) of the Act, and agreements or arrangements that divide markets by allocating customers, suppliers, territories, or market shares contravene section 4(1)(b)(ii). In the context of a confirmed consent agreement, these contraventions may be admitted by the respondent and addressed through agreed remedies and penalties without contested adjudication in the confirming decision.

The Tribunal may confirm agreed terms that include forward-looking behavioural commitments, compliance programme measures, cooperation obligations in ongoing investigations, and an administrative penalty determined by reference to turnover, as provided for in sections 58 and 59 of the Act.