Competition Commission v Aveng (Africa) Ltd t/a Steeldale and Others (84/CR/DEC09) [2012] ZACT 32 (7 May 2012)

COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 84/CR/DEC09
In the matter between:
THE COMPETITION COMMISSION Applicant
And
AVENG (AFRICA) LIMITED t/a STEELDALE First Respondent
REINFORCING MESH SOLUTIONS (PTY) LTD Second Respondent
VULCANIA REINFORCING (PTY) LTD Third Respondent
BRC MESH REINFORCING (PTY) LTD Fourth Respondent
Panel : Norman Manoim (Presiding Member), Medi Mokuena (Tribunal Member)
Lawrence Reyburn (Tribunal Member)
Heard on : 28 February 2011 – 2 March 2011
Final Argument on : 8 August 2011 and 10 August 2011
Order issued on : 7 May 2012
Reasons issued on : 7 May 2012
Reasons for Decision and Order
1

Introduction
1]On 2 December 2009 the Competition Commission (the “Commission”)
referred a complaint against four firms (the “respondents”) alleged to
have been involved in a cartel of wire mesh producers. One firm, BRC
Mesh Reinforcing Limited (“BRC”), the fourth respondent, was granted
conditional immunity by the Commission in terms of its corporate leniency
policy (“CLP”); another, Aveng (Africa) Limited trading as Steeledale
(“Steeledale”), the first respondent, has since the referral, settled with the
Commission in terms of a consent agreement. 1 The two remaining firms,
Reinforcing Mesh Solutions Pty (Ltd) (“RMS”), the second respondent,
and Vulcania Reinforcing Pty (Ltd) (“Vulcania”), the third respondent,
have defended themselves on various grounds. The hearing to which this
decision relates concerns proceedings the Commission has brought
against these two respondents.
Commission’s case
2]The Commission’s case is that the respondents contravened sections
4(1)(b)(i) and 4(1)(b)(ii) of the Competition Act No. 89 of 1998 (“the Act”),
during a period that lasted from at least 2001 to 2008. The contraventions
comprised agreements between the respondents and at times other firms
on the following matters:
2.1] A price list for reinforced mesh products;
The level of discounts offered to particular categories of customers;
The allocation of customers.2
3]The Commission alleges that the agreements came about as a result of
meetings that initially took place under the auspices of an industry
association, the South African Fabric Reinforcing Association (“SAFRA”)
and later as a result of informal meetings involving some or all of the
1 The Tribunal confirmed the consent agreement on 6 April 2011. The settlement agreement relates to
two contraventions by divisions of Aveng Limited, one in respect of wire mesh and thus relevant to the
present case and the other in relation to rebar (reinforcing bar) which is the subject of a separate

complaint. The penalty agreed was R128 904 640 and represented 8% of Steeledale’s turnover for the
2008 financial year. (See paragraph 7.1 of the settlement agreement).
2 See Commission’s founding affidavit paragraph 13.1.
2

respondents. 3
Background
4]Wire mesh is an input into the construction industry. It is used to reinforce
concrete. The wire mesh manufacturers purchase steel rod in coils from
steel mills and put it though a process by which the material is drawn
down to a specific diameter and then welded at fixed intervals
corresponding to the desired mesh apertures. 4 Customers include
construction firms and resellers of building products. Customers thus vary
greatly in size and nature as well as geographic location.
Firms competing in this industry produce a product considered by their
customers as a commodity with limited differentiation. The business
model of most of these firms is to add a margin to their input costs per
unit. The inputs largely comprise steel rod, said to constitute roughly 60-
80% of the price; labour used to convert the input into the final product;
and transport.5 Most firms in this industry testified that they are faced with
similar input costs. Steel prices from the mills vary only as to quantity
purchased, while labour costs are similar.
It is common cause that a cartel existed in this industry for some years.
No one is sure for how long as none of the current witnesses were
present at its inception, but they were aware of its existence by the time
they joined it. The industry leaders were Steeledale and BRC; historically
they, or their predecessors, formed the core of the cartel. For the purpose
of this decision their participation is not controversial.
What is in issue for us to decide in this case is in respect of Vulcania;
whether it is liable and if so what would be an appropriate remedy to
impose on it. As we shall consider later, Vulcania, whilst admitting
attendance at meetings with its competitors on several occasions, denies
that its actions amounted to an agreement to join the cartel and hence
denies liability.
In respect of RMS, which admits liability, the issue is the extent of its

denies liability.
In respect of RMS, which admits liability, the issue is the extent of its
involvement in the cartel and then two further issues – whether a penalty
can be competently imposed upon it, for reasons we consider later, and if
it can, what an appropriate penalty is.
The approach we have taken in this decision is to deal first with the
liability of the respondents. In this regard we deal initially with factual
issues that affect both respondents and then we consider them
separately, to evaluate their respective participation.
Hearings
3 See Commission’s founding affidavit paragraph 13.4.
4 See testimony of Pierre Griffin, transcript page 25.
5 See testimony of Griffin, transcript page 25.
3

5]The case was heard from 28 February to 2 nd March. Final argument was
heard on 8th and 10th August 2011. The following witnesses testified: for
the Commission, Pierre Griffin (formerly sales and marketing manager of
BRC Mesh), Martin Cawood (sales and marketing manager of BRC
Mesh, who succeeded Griffin) and Jeremy Hartnady (marketing manager
of Steeledale Mesh); for RMS, Carlo di Nicola and Trevor Hankey; and
for Vulcania, Sean Greve.
PART A
LIABILITY:
Origins of the cartel
6]SAFRA, the industry association for the wire mesh industry, was formed
in 1970. Its ostensible purpose was to promote the use of wire mesh by
industry. Wire mesh competed with the reinforcing product known as
rebar. SAFRA’s intention was to promote the use of wire mesh over rebar
in the building industry.6
The problem faced by the wire mesh manufacturers was that they had to
pay more for their rod inputs than did the firms supplying rebar. Also,
mesh is a capital-intensive industry. Rebar whilst cheaper to manufacture
is more expensive to install, as it comprises loose bars that have to be
manually tied together. Whilst this latter consideration might have
balanced the scales between the two functionally similar products, mesh
firms were concerned about preserving the margins they earned on their
product.7
At some date, none of the witnesses were quite sure when, meetings of
the industry association, which were attended by competing wire mesh
manufacturers, decided to discuss a recommended price for their
product.8 At the very latest, on the documentary evidence before us, this
had occurred by December 2001.9 The modus operandi of SAFRA was
that a price was discussed at meetings and then agreed. Afterwards
6 See testimony of Griffin, transcript page 27, and Hartnady page 156.
7 See Hartnady’s testimony, transcript pages 157-8.
8 Di Nicola of RMS stated that this went back 30 to 40 years: transcript page 273.

8 Di Nicola of RMS stated that this went back 30 to 40 years: transcript page 273.
9 Note that at the SAFRA executive meeting of 5 Dec 2001, items for the next year’s agenda were
discussed. The first item was: “New pricing structure and format.” (See discovery bundle D 937).
4

SAFRA would circulate a recommended price list to members. According
to Pierre Griffin once the list had been circulated all four of the
respondents in this case would adopt it. 10
The price increases followed a similar pattern over the years. The
meeting would get information on likely steel price increases from the
main manufacturer Iscor, later ArcelorMittalSA, (“AMSA”) and wage
settlements from SEIFSA (the steel industry federation to which SAFRA
was affiliated). They then applied these increases to a pre-determined
formula resulting in the recommended price.11 The formula was most
closely associated with one individual from Steeledale, Costa Cassa, who
had at times chaired SAFRA, and hence it was referred to as the ‘Costa
formula’, although it was not necessarily his creation.
The important aspect of the formula was that it enabled the competing
firms to uniformly pass on input cost increases by providing a common
mechanism for deriving the final price. Absent such an agreement,
although firms were faced with similar cost increases at similar times, it
does not follow that in a competitive market the final price to their
customers would have been identical. Increases in input costs might have
been passed on in varying amounts or not at all; or passed on at different
times, depending on how much stock of rod a firm had stockpiled at pre-
increase prices.
Pierre Griffin of BRC, testifying for the Commission, explained that the
timing of the increases was vitally important. If price increases were not
implemented simultaneously, customers would have had the opportunity
to search for better prices which might have led firms which implemented
earlier to lose customers, possibly permanently, to firms which
implemented later.12
Thus what the cartel’s agreements served to do was to resolve several
important pricing issues for its members when faced with input price
increases for steel rod and labour. They answered what their own

increases for steel rod and labour. They answered what their own
responding increases would be, how they would pass them on to their
customers, and when.
The kernel of this mechanism, which was confirmed by Jeremy Hartnady
of Steeledale, who also testified for the Commission, was the Costa
formula, which was set out in the documents discovered by his firm.
Because as a matter of practice all customers were given a discount off
the list price, the firms in the cartel had to reach agreement on the level of
discount as well. On the example given by Hartnady, once all the
calculations had been made, the increase on the list price was to be
10,4%.13 The effective increase, however, once the discount was
applied, was 8,9%.
When did the collusion start? The document in the record setting out the
Costa formula is dated May 2001 and reflects that the relevant increase
was to be effective from 1 July 2001. Griffin testified that a base formula
10 See witness statement of Pierre Griffin, record page 91.
11 At some stage it seems their ambitions went further, to include other costs, but this does not seem to
have been adopted in practice. At the SAFRA executive meeting on Feb 2002 the attendees discussed
whether plant and equipment costs should be included in the escalation. (See discovery bundle D942.)
12 See Griffin’s witness statement record page 94.
13 See Hartnady’s testimony page 162-3 and discovery bundle page 1203.
5

existed even before 2001.14 A minute of a SAFRA meeting in June 2001
records that “...the present method of escalation calculation remain.”15
Thus the probabilities are that the arrangement was in place from at least
2000. The exact date is not relevant in respect of Vulcania and RMS as it
is common cause that their attendance at cartel meetings took place after
this period. What is relevant for the purpose of remedies is that the cartel
was in existence for some time before these companies are alleged to
have joined.
Curiously, the evidence was that prior to 2005, the use of the SAFRA
base price was transparent. Customers could get it from SAFRA and
members of SAFRA gave it out to them. This conduct was not considered
by SAFRA members to be anti-competitive.16 Sometime in 2005,
however, the association was given legal advice by a Mr McDonald that
the arrangement might infringe the Competition Act. This is Griffin’s
recollection, but there is also documentary evidence to support this.
In the minute of the SAFRA executive meeting of 5 July 2005, it is noted
that the opinion of McDonald had been circulated. The way members
responded to this advice is noteworthy. Instead of abandoning the
practice they resorted to subterfuge. In the minute of the same meeting, it
is recorded, “It was agreed to maintain the status quo and not to change
the current situation in this regard.” 17 Witnesses for the Commission
confirmed that members continued to apply a SAFRA base price, but did
so on their own letterheads. Griffin testified that he would check up on
competitors from time to time to see whether they were following the
agreed pricing.18
Hartnady also confirmed this modus operandi. He added that members
might have “...tweaked the prices a little bit, just to make it look as if
everything wasn’t copied verbatim and they would apply that to their own
letterheads.”19
Trevor Hankey of RMS confirmed during cross-examination that this was
the case.20

Trevor Hankey of RMS confirmed during cross-examination that this was
the case.20
Meetings between the firms also took place informally i.e. not as part of a
SAFRA meeting. They were held in restaurants and hotels. It is not clear
from the record or the testimony when the informal meetings started.
From the notes discovered by Steeledale informal meetings date back to
at least January 2001.21
Why did the cartel members need informal meetings if they were able to
meet as members of SAFRA? One explanation is that SAFRA operated
transparently, keeping minutes of meetings at which agreements reached
were recorded, and had its own staff who were not industry players. The
cartel members would not want the SAFRA staff to know of the cartel’s
14 Transcript page 28.
15 Discovery bundle page 929, being minutes of SAFRA meeting dated 7 June 2001.
16 See Griffin’s statement, record page 91.
17 Discovery bundle page 1035. Note that this is minuted under the item headed “New pricing
structure and format.”
18 See Griffin’s testimony, transcript page 37.
19 See Hartnady’s testimony, transcript page 160.
20 Transcript page 248.
21 See D 1181 which is dated 18 January 2001.
6

agreements on issues other than the pricing formula. Thus although
informal meetings seem to have been in existence in parallel to those of
SAFRA, they were used to discuss that which could not be discussed at
SAFRA. This subject-matter included market division, customer
allocations and, after McDonald’s 2005 warning, the pricing formula.
Griffin testified that informal meetings discussed pricing adjustments,
allocation of customers and any deviations from agreements. He
mentions that attending these meetings were Hartnady of Steeledale,
Hankey of RMS, Greve of Vulcania, and himself for BRC.22
Hartnady testified that the purpose of the informal meetings was, in his
self-serving vision of the cartel, to: “...reinstate some sort of sanity into
the market.” He testified that profit margins, as the cartel members
perceived it, were getting down to break-even. 23
The cartel’s pricing formula provided for steep discounts from the list
price. Indeed this was an issue of concern to them as customers were
suspicious of large discounts.24 What the cartel members agreed upon
as well, was the size of different discounts to different types of
customers.25 The largest discounts were given to fellow subsidiaries or
associate companies within the same group, where a cartel member was
part of a group of companies. Discounts also varied in size depending on
whether customers were in the construction industry or were merchants
and, in the latter case, whether they were large or small.26
In the last years of the cartel, at a time when both Vulcania and RMS
attended meetings, there was a trend to move away from agreeing on
pricing to customer allocation. Hartnady explained in his testimony that
there were different views on price increases and new firms were moving
in and “...undermining settled scenarios...” For this reason firms started
moving to agreements about customer allocation and market division to
avoid a “free for all.” 27
RMS – Liability in terms of section 4(1)(b)

avoid a “free for all.” 27
RMS – Liability in terms of section 4(1)(b)
7]RMS is a subsidiary of Capital Africa Steel (Pty) Ltd (‘CAS’). The position
of this company in its group structure is a controversial matter in this
case, as we discuss more fully later in the remedies section. In March
22 Transcript page 38
23 Transcript page 170.
24 One document discusses discounts of 45% off the list price: see notes discovered by
Steeledale dated 24 October 2002, discovery file page 1302. See also the SAFRA executive
meeting minutes dated 26 June 2003, where it is recorded that: “It was agreed that the
discount structure was viewed by customers as ludicrous.” The minute goes on to suggest
that members take steps to remove the current ‘... huge discount scenario’. (Discovery bundle
D 973).
25 See founding affidavit para16 record page 14 annexure IL 1 and IL2. This is admitted by
Hartnady in his affidavit: record page 42. See also record page 65 and the answering affidavit
of Greve of Vulcania, record page 79.
26 Hankey confirms discounts of 35- 40%: transcript page 255. See also discovery bundle
D1043 which records differential discounts to different classes of customers.
27 Hartnady’s testimony, transcript page 172-3.
7

2002, a firm called Burbank Investments changed its name to Reinforcing
Mesh Solutions with the intention of entering the steel mesh and
reinforcing markets. Trevor Hankey joined RMS at this time to launch the
mesh business. Hankey was previously a director of BRC, the fourth
respondent. During the time he was with BRC, Hankey had attended
various meetings of SAFRA on BRC’s behalf and is recorded as having
attended some of the informal meetings of competitors in that capacity in
November 2001.28
Hankey acknowledged this prior involvement which, from
correspondence to him in his BRC capacity, continued until at least 6
February 2002.29
Hankey’s evidence, which corresponds with the position adopted by
RMS, is that the firm was a late and reluctant member of the cartel.
Hankey stated that when the firm entered the market it faced a number of
obstacles which he attributed to the conduct of competitors. Producers of
plant, he testified, would only supply equipment at excessive prices and
RMS had difficulty in obtaining supplies of rod from steel mills.30
Eventually RMS entered into a supply agreement with Iscor, as AMSA
was then known, and commenced operations with its first run in
November 2002.31
Whilst Hankey may have a motive to exaggerate these difficulties there is
evidence that competitors, in particular Steeledale and Allens Meshco,
did not welcome RMS’s entry into the market. A minute of one of the
informal meetings, dated 3 October 2002, whilst cryptic, indicates
concerns about RMS’s entry from those who were at this meeting. One
entry states: “What will Steeledale (sic) approach be with RMS” The next
entry, which may have been made at a meeting later in October, records
the remark, “Allens Meshco recommends that we put a new price list that
makes it difficult for new comers.” A suggested price follows. It is not
clear whether this suggestion was followed.
8]Nevertheless RMS, despite its promising pro-competitive start, eventually

8]Nevertheless RMS, despite its promising pro-competitive start, eventually
joined SAFRA and the cartel. We only have Carlo Di Nicola’s version of
how this happened. Di Nicola was the chairman of RMS and a former
employee of Murray and Roberts, which owns BRC.
9]In its formative years, as we noted earlier, RMS was considered an
28 Discovery bundle page D1241.The document states, “ Trevor Hankey BRC advises
that .....”. See also D1183 where the note records him being present at a meeting in February
2001.
29 Discovery bundle D1259. Hankey’s witness statement, record page 183.
30 Transcript page 229, and witness statement page 184. Hankey was unable to offer
anything more than surmise for this theory. (See transcript page 229 where he testifies:
“...well they could have, I assume, I’ve got no facts. ..”).
31 Transcript page 228 and witness statement record page 184.
8

interloper, disrupting a comfortably settled industry. BRC, in particular,
threatened by RMS, responded by degrading the reputation of RMS’s
products in the market. Upset by this, Di Nicola, who was still in contact
with Murray and Roberts’ people, and being an alumnus of that firm,
mentioned his concerns to a colleague there. Di Nicola states he had
retained regular contact with his erstwhile employer in respect of other
work that he had to hand over. In the course of such discussions those
sympathetic to Di Nicola set up a meeting with the relevant BRC people
to discuss the so-called ‘bad-mouthing’. At the meeting, held at a golf
range, at which Di Nicola was present, a senior Murray and Roberts
person told his colleagues to desist from that behaviour. It seems that
everyone made up. That, according to Di Nicola, was as far as the
conversation went at that time. In his witness statement Di Nicola dates
this meeting as some time in the first quarter of 2004.32
10]At a later stage, and Di Nicola was not clear about how long it took, he
was phoned by Rick Allen of Allens Meshco to discuss “... how the
market worked”.33 At Allen’s suggestion, Di Nicola hosted a meeting at
RMS’ offices which Allen and representatives of BRC attended. Thus
although on Di Nicola’s version the initial contacts did not have a
collusive nature, they subsequently, at the behest of Allen, did.
At this meeting the size of the market was discussed and, at Allen’s
suggestion, everyone agreed to submit their last six months’ tonnages so
that the total market size could be calculated at a follow-up meeting.
Present at the further meetings were RMS, BRC and Allens Meshco. Di
Nicola claims that Allen represented Vulcania as well, as he knew what
their tonnages were. (Under examination from Vulcania’s counsel he
qualified this to say he did not know whether Allen represented Vulcania
as he could have known its tonnages from being its supplier.34)

as he could have known its tonnages from being its supplier.34)
Di Nicola said that at this meeting the suggestion was made that each
firm reveal its customer list, and that each should ‘respect’ the others’
customers. He then instructed Hankey to do this. As he put it in his
testimony:
“ ...Trevor there is nothing wrong with it, just show the people what you are
dealing with and everyone else did the same and that famous list that is in the
32 See Di Nicola’s witness statement, record page 139.
33 See Di Nicola’s witness statement, record page 139.
34 Transcript 303.
9

files is the outcome of that.”35
11] They agreed to ‘respect’ one another’s customers although Di Nicola states
there was not much overlap in any event. 36 Thereafter, Di Nicola testified, he
was no longer involved in meetings with competitors, but Hankey was. 37
Hankey briefed him on these from time to time.
According the Hankey his first contact with competitors while
representing RMS occurred when Fred Erasmus and Pierre Griffin of
BRC contacted him early in 2003. They proposed buying RMS’s entire
mesh production on an ongoing basis. Although Hankey was receptive to
this proposal nothing came of it.38
Hankey stated that no further contact with competitors took place till the
following year. Pursuant to the meetings held with Di Nicola, he was
invited, either by Hartnady of Steeledale or Erasmus of BRC, to attend a
meeting with the other respondents, excluding Vulcania.39 At this
meeting client lists were discussed. Hankey suggested the meeting may
have taken place on 24 March 2004. In his testimony Hankey stated that
RMS was invited to join the cartel in 2003 and he joined SAFRA meetings
in 2004, and in his words “...from there on we proceeded with informal
meetings as a cartel”.
Hankey conceded that several informal meetings took place between
2004 and late 2007 or early 2008. Thus on his version RMS’s
participation in the cartel lasted approximately four years. He said that the
last meeting of the cartel was around January 2008. 40
Records from SAFRA’s minutes of RMS’s relationship with SAFRA offer
independent corroboration of Hankey’s version. Initially, and consistently
with the oral testimony of Di Nicola and Hankey, RMS seemed reluctant
to join SAFRA. In October 2002 and thus at a time before RMS had
commenced trading, the SAFRA executive minutes reflect that “...Mr
Hankey of RMS has indicated that his company wished to join the
Association. Mr Mountford to follow up.41 However, at the next meeting it
is recorded that a Mr Pastorino from RMS had told Mountford his

is recorded that a Mr Pastorino from RMS had told Mountford his
company declined to take up membership.42
But then on 19 February 2004, the minutes of the first SAFRA meeting for
that year record that the organisation welcomed “... the new member
represented by Mr Hankey”. Given the close relationship between
35 Transcript 268. He is referring to the list at page 98 of the record.
36 For this history see Di Nicola’s witness statement, record page 139.
37 Save for one with Rick Allen which he mentions but gives no details of. See record page
140
38 Record page 185 paragraphs 15-16.
39 After, as Hankey put it in his testimony, he had received the “...go-ahead and the okay from Mr
Di Nicola to see the other people, the other parties.”
40 Transcript page 242.
41 Discovery files page D 962. Mountford is the director of SAFRA.
42 Discovery file page D 969 meeting of SAFRA executive dated 20 February 2003. Pastorino
was a former employee of BRC who had left to found RMS with Hankey. Transcript page 178.
10

members of the cartel and membership of SAFRA, it is likely that at least
by the beginning of 2004, RMS was a member of the cartel.
The question is whether there is any evidence to show it was a member
of the cartel earlier. The Commission has not challenged this version nor
has it led any evidence to the contrary. Hankey also offers a plausible
reason why other members of the cartel might not have made overtures
to RMS before 2004. He surmises that the large firms hoped that RMS
would fail in the market and only when it had not done so after a year, did
they make the approach.
Hartnady suggested in his evidence that the cartel members had two
options at the time for dealing with RMS, co-option or exclusion. The
easier option was to get RMS to meetings and get it under the cartel’s
control.43 He did however confirm that prior to joining the cartel, RMS
had approached BRC to supply it with wire and BRC had declined,
because RMS was going to compete with it.
We find that the probabilities are that RMS only became a member of the
cartel in 2004. It also is common cause that the cartel ended in early
2008, when Murray and Roberts, the owners of BRC, approached the
Commission in terms of its leniency application in a variety of
construction-related industries. The cartel in the wire mesh industry was
revealed as a consequence of this approach.
There is no dispute about the content of the cartel agreements during the
four-year period when RMS was a member. Members, as we have noted,
agreed on the pricing formula and its implementation from time to time
when faced with changes in input prices. They allocated customers and
monitored adherence. The Commission has therefore established the
allegations made out in paragraph 13.1.1 to 13.1.3 of the founding
affidavit insofar as RMS is concerned.
12]We thus find that RMS has contravened sections 4(1)(b)(i) and 4(1)(b)(ii)
of the Act.
We deal later with other evidence in relation to RMS’s degree of
participation when we consider the remedy.

participation when we consider the remedy.
Vulcania – Liability in terms of section 4(1)(b)
13]Vulcania’s evidence was that it commenced attending meetings of the
cartel only in 2006.
Sean Greve, the managing director of Vulcania, stated that in January
2006 he was approached by Adrian Mountford to join SAFRA. The firm
joined SAFRA that same month. He attended his first meeting on 3rd
March 2006. At more or less the same time he attended informal
meetings of the cartel members. He stated that he attended no more than
five or six of these meetings. The other attendees were representatives of
the respondents in this case. His description of the subject-matter of
meetings is consistent with the testimony of other witnesses; in particular
43 Transcript page 187.
11

which manufacturers would serve which customers, that manufacturers
should not supply other firms’ customers, and agreement on pricing and
levels of discounts.
But Greve suggested that decisions taken at these meetings were not
final, as they were subject to confirmation by and the approval of senior
management of the respective companies. Vulcania, however, did not
have a management level higher than Greve. Greve asserted that in
these circumstances Vulcania did not consider these decisions as binding
upon it and it did not adhere to them. In particular, according to Greve,
Vulcania did not adhere to the pricing formula or respect the customer
allocations made at these meetings.
In a nutshell, Greve contended that Vulcania’s attendance at cartel
meetings was a sham, calculated to make its competitors on whose
goodwill Vulcania depended for some of its supplies believe that Vulcania
was a member of the cartel and thus obviate retaliation in the form of
supply constraints. Once Vulcania had obtained an independent source
of supply for rod in coil and installed the requisite machinery to process it,
Vulcania ceased attending meetings of the cartel. This, he said, occurred
some time in 2008.
In order to evaluate the credibility of this defence it is necessary to
understand Vulcania’s history in greater detail. Vulcania was the last of
the respondents to join SAFRA and to attend the so-called informal
meetings. Vulcania evolved out of a firm known as Polymesh which had
entered the reinforcing mesh market in the 1990s. Polymesh produced
mesh from wire in coil as opposed to rod in coil, which is what the other
respondents did. The consequence of this was a cost disadvantage of
10-15%.
This cost disadvantage forced Polymesh into becoming a niche supplier
to small building contractors, supplying them with all their needs.
Vulcania was formed in 2000 and took over the Polymesh business.
Initially it too suffered from the same supply limitations. Matters only

Initially it too suffered from the same supply limitations. Matters only
changed in 2005 when Vulcania purchased a 50% interest in a company
called Steel Straighteners which was another mesh producer.
Its partner in the takeover of Steel Straighteners was an Allens Meshco
subsidiary. After the takeover Allens Meshco commenced supplying rod
in coil to Steel Straighteners.
Initially, despite this relationship with the Allens Meshco Group through
Steel Straighteners, Vulcania still experienced problems in getting rod in
coil supplied.
However the Steel Straighteners takeover had created an additional
opportunity for Vulcania. Cape Gate, a steel mill that supplies rod in coil
had lost a customer in Steel Straighteners as a result of the takeover.
Vulcania was able to negotiate a favourable agreement with Cape Gate
to supply rod in coil. At this time Vulcania did not have the requisite
machinery to draw the rod wire. It took another year for Vulcania to
commission, purchase and install this machinery. Thus according to
Greve it took till early 2008, once the new machinery was running, for
Vulcania to become a serious competitor.
Vulcania like the other respondents eventually became a SAFRA
member. The SAFRA minutes for February 2003 recorded that Mountford
12

was to contact Greve of Vulcania and Cardinal of Cape Gate to try to get
them to join the association. This is in the context of SAFRA recruiting
other members, as overtures to Cape Gate and a renewed request to
RMS were discussed at this time as well.44
No mention was made in the minutes of the outcome of this overture, if it
took place at all. However the minutes of two subsequent meetings
indicate that no new members had applied. One minute, from June 2003,
records that the time was not ripe in the market for new members and
that the association should wait till things ‘settle down’ because there
were a number of ‘changes taking place in the industry’.45
The next express mention of Vulcania in the minutes came in June 2004
when it was recorded that a Mr Erasmus had requested that a
membership application form be sent to Greve.46 Again the minutes
recorded that other firms were to be approached to become members.
including Steel Straighteners.
It seems that Vulcania was not interested in becoming a member as it
was recorded at the next SAFRA executive meeting, in September 2004,
that Mountford had again attempted to contact Greve “... but to no
avail.”47 The next entry on the subject came a year later, in the minutes
of the SAFRA executive in August 2005, which recorded that Hankey
(now of RMS) was to approach Vulcania to join.48
Vulcania joined SAFRA in early 2006. The minutes of the SAFRA
executive meeting dated 7 February 2006 reflect that Greve was
welcomed as attending his first meeting, “...his company having recently
joined the association.” 49
At the meeting in April 2006 it was recorded under the heading
“Escalation strategy” that “..Mr Cassar’s formula for escalations will be
passed on to Mr Greve by Mr Hartnady.”50 This is clearly a reference to
the Costa formula discussed above.
Although Greve says in his witness statement that he attended his first
SAFRA meeting in April 2006 he corrected this in his oral testimony and

SAFRA meeting in April 2006 he corrected this in his oral testimony and
accepted the correctness of the minutes i.e. that Vulcania joined in
February 2006.
The significance for Vulcania of the date when it joined SAFRA is that
Greve testified that he only commenced attending informal meetings after
he had attended his first meeting at SAFRA.51 This means that on his
version, he only commenced attending the informal meetings from early
2006.
However other evidence suggests his attendance at informal meetings
may have preceded formal membership of SAFRA. A schedule of
customers faxed on 26 October 2005, discovered by Steeledale, headed
‘Allocations/pricing’ contains a list of customers’ names with the name of
44 See minutes of SAFRA executive meeting dated 20 February 2003, discovery bundle 969.
45 See minutes of SAFRA executive meeting dated 26 June 2003, discovery bundle 974.
46 Minutes of SAFRA executive meeting dated 24 June 2004, discovery bundle page 1005.
47 Minutes of SAFRA executive meeting dated 9 September 2004, discovery bundle page D1009.
48 Minutes of SAFRA executive meeting dated 30 August 2005, discovery bundle page D1039.
49 Minutes of SAFRA executive meeting dated 7 February 2006, discovery bundle page D1046.
50 Minutes of SAFRA executive meeting dated 11 April 2006, discovery bundle page D1054.
51 See transcript page 318.
13

the supplier next to each. The suppliers’ names include BRC, RMS and
Steeledale. But significantly included are customers seemingly allocated
to Vulcania. If customers were allocated at an informal meeting to
Vulcania, the probabilities are that Greve attended a meeting at about
that time.
If Hankey, as the SAFRA minutes state, made an overture to Greve to
join SAFRA in around August 2005, it may well be that an invitation to
attend informal meetings and acceptance of the invitation were part of the
same conversation, which would place Greve at an informal meeting as
early as late 2005, thus consistently with the date of the schedule. Nor
did Greve explain how he came to attend the informal meetings. He
limited his explanation to the invitation to join SAFRA which he said came
from Mountford. If Vulcania had commenced attending the informal
meetings of the cartel at an earlier date this would be relevant to the
issue of duration for the purpose of a remedy. However as the
Commission has not challenged Vulcania’s version on this aspect, and as
the addition of three extra months does not materially alter the duration of
participation, we will accept Vulcania’s submission that its involvement
did not exceed a period of two years.
Whatever the precise period of the informal meetings Greve recalls
attending no more than five or six.52 Again this fact is not in dispute. The
content of the discussion, according to Greve, related to pricing and
levels of discounts to be given to the various classes of customers. Also
discussed were which customers ‘belonged to’ which manufacturer and
the cartel rule that manufacturers should not try to supply the customers
of other manufacturers.
14]In this respect Greve’s version of the content of the discussions does not
differ markedly from those of the witnesses called by the Commission.
What he does dispute is the centrality of his own role in these discussions
and the status of agreements reached during their course.

and the status of agreements reached during their course.
15]Vulcania contends that it cannot be held liable in terms of section 4(1)(b)
in respect of its attendance at meetings with its competitors because: (i) it
took an entirely passive role in these discussions and; (ii) the agreements
reached at these meetings were inchoate in that they required
subsequent ratification by more senior managers of the firms at meetings
to which it was not party.
We deal first with the issue of Vulcania’s passive role in discussions.
Since only Greve represented Vulcania at these meetings, evaluating that
firm’s conduct means assessing his conduct.
Martin Cawood of RMS testified about an incident in which he, as a
newcomer to the meetings on behalf of his firm, was being criticised for
not having passed on price increases in accordance with the Costa
52 Greve’s witness statement, record page 248.
14

formula. Rather than increasing the full selling price of the mesh by the
same percentage as the increase in the relevant input cost, he passed it
on proportionately; thus if the steel price increased by 10% and steel
constituted 80% of the input costs of mesh, he would pass on a final price
increase for the mesh of 8%, not 10%. Hence Cawood was charging a
lower price to customers than were the other suppliers. He was hauled
over the coals for this by the others at a meeting Greve attended.
Cawood testified that at some stage during the meeting Greve took out
his calculator and performed a calculation to show that he (i.e Cawood),
was not passing on the increase as agreed. This Cawood interpreted as
indicating Greve’s willingness to go along with the cartel and Greves’
enthusiasm for its objectives. Greve denied having admonished Cawood
at this meeting, saying that he was in no position to do so. What he
appeared to mean by this is that Vulcania, given its small market share,
was in no position to exert muscle over one of the bigger firms.53 Under
cross-examination he appeared to suggest that no one admonished
Cawood; neither he nor anyone else present.54
He does however admit that he took out his calculator, but says this was
to assist Cawood to use the formula correctly.55 Whilst this vignette might
seem trivial it is relevant to the question emphasised by Vulcania that
although Greve attended five or six meetings he was largely passive – as
he put it in testimony “... taking instructions and listening.” On this dispute
of fact we find Cawood’s version more credible. If Greve was the passive
listener he would not have taken out his calculator to intervene in a
dispute between the bigger players as to whether Cawood was adhering
to a previous understanding over price increases. The fact that he did,
suggests he was anxious to show the others that his firm was no less
enthusiastic than they about increasing the full selling price and not

enthusiastic than they about increasing the full selling price and not
merely adjusting the selling price to reflect input prices. It is fair to say
that the other firms in turn would have inferred from this that Vulcania
was a willing member of the cartel.
There is no reason for Cawood to have embellished his evidence on this
aspect and given that he was the one being criticised he is likely to have
had a clearer memory of it.
But this is not the only evidence of a lack of passivity by Greve. Two of
the other witnesses, Hartnady and Griffin, testified that Greve had
attended meetings and contributed to the proceedings at them. Greve
tried to downplay this and stated that he merely contributed his customer
list.56 In its answering affidavit Vulcania admits that it:
“ ...created an appearance of co-operation with the other mesh manufacturers...
because of its vulnerability in the market and only while it was perforce reliant
on the benevolence of those other manufacturers” 57
53 Witness statement page 249.
54 Transcript page 342.
55 Transcript page 344.
56 Transcript page 345.
57 Record page 252 paragraph 25.
15

16]Thus even on its own version Vulcania represented sufficiently to the
others that it was part of the understanding. It does not suggest that its
alleged passivity was open to misinterpretation by the others. On the
contrary, its sense of vulnerability required it to gain the confidence of the
other firms that it was an adherent to their collusive agreements.
But his involvement went further than attendance at discussions. Greve
does not deny contributing his customers’ names to the list that was
prepared and of which we have a manuscript version in the record. He
states however that the customers on the list were already his firm’s and
that Vulcania gained nothing in the process. He also asserted that
Vulcania ‘cheated,’ and did business with customers regarded as
allocated to other firms.
Even if this is so, and we have to accept his evidence on this aspect, this
does not exculpate Vulcania. Having participated in the price-setting and
customer allocation processes, even if he never intended to implement
the agreements reached, his conduct facilitated the cartels’ customer
allocation endeavours. The firms in the room were given no reason to
believe that Vulcania would compete for their allocated customers and
hence they would have to lower their prices to them. Since these
participants believed that Vulcania was going along with them, they did
not withhold the quid pro quo: there is no evidence that any of them
sought to do business with Vulcania’s customers. To that extent the
cartel arrangements, whether Vulcania’s participation was real or a sham,
protected Vulcania from potential competition, and to that extent Vulcania
benefited from the cartel.
Whatever its private reservations, Vulcania held out that it was a member
of the cartel and by doing so aided its purpose. Repeated attendance at
informal meetings – at least five or six on its own version – in conjunction
with attendance at the alter ego, in the form of SAFRA executive

with attendance at the alter ego, in the form of SAFRA executive
meetings, only strengthened the assumptions the remaining firms could
make that Vulcania was one of them. The incident with Cawood further
reinforced perceptions that Vulcania was a willing partner.
European case law has long considered these defences offered by
Vulcania and rejected them. Perhaps this is best set out in a decision of
the European Court of Justice (ECJ) in the Aarlborg Portland AS case.58
We quote what is a lengthy extract because the court’s approach is
strikingly apposite to the facts of this matter.
“81. According to settled case-law, it is sufficient for the Commission to show
that the undertaking concerned participated in meetings at which anti-
competitive agreements were concluded, without manifestly opposing them, to
prove to the requisite standard that the undertaking participated in the cartel.
58 Aalborg Portland A/S v Commission of the European Communities (Joined Cases
C-204/00 P, C-205/00 P, C-211/00 P, C-213/00 P, C-217/00 P and C-219/00
P) .
16

Where participation in such meetings has been established, it is for that
undertaking to put forward evidence to establish that its participation in those
meetings was without any anti-competitive intention by demonstrating that it had
indicated to its competitors that it was participating in those meetings in a spirit
that was different from theirs (see Case C-199/92 P Hüls v Commission [1999]
ECR I-4287, paragraph 155, and Case C-49/92
P Commission v Anic [1999] ECR I-4125, paragraph 96).
82.The reason underlying that principle of law is that, having participated
in the meeting without publicly distancing itself from what was discussed,
the undertaking has given the other participants to believe that it
subscribed to what was decided there and would comply with it.
83. The principles established in the case-law cited at paragraph 81 of
this judgment also apply to participation in the implementation of a single
agreement. In order to establish that an undertaking has participated in
such an agreement, the Commission must show that the undertaking
intended to contribute by its own conduct to the common objectives
pursued by all the participants and that it was aware of the actual
conduct planned or put into effect by other undertakings in pursuit of the
same objectives or that it could reasonably have foreseen it and that it
was prepared to take the risk (Commission v Anic, paragraph 87).
84. In that regard, a party which tacitly approves of an unlawful initiative,
without publicly distancing itself from its content or reporting it to the
administrative authorities, effectively encourages the continuation of the
infringement and compromises its discovery. That complicity constitutes
a passive mode of participation in the infringement which is therefore
capable of rendering the undertaking liable in the context of a single
agreement.
85. Nor is the fact that an undertaking does not act on the outcome of a

agreement.
85. Nor is the fact that an undertaking does not act on the outcome of a
meeting having an anti-competitive purpose such as to relieve it of
responsibility for the fact of its participation in a cartel, unless it has
publicly distanced itself from what was agreed in the meeting (see Case
17

C-291/98 P Sarrió v Commission [2000] ECR I-9991, paragraph 50).
86. Neither is the fact that an undertaking has not taken part in all
aspects of an anti-competitive scheme or that it played only a minor role
in the aspects in which it did participate material to the establishment of
the existence of an infringement on its part. Those factors must be taken
into consideration only when the gravity of the infringement is assessed
and if and when it comes to determining the fine (see, to that
effect, Commission v Anic, paragraph 90).” 59
17]This approach has been more recently followed in another ECJ decision,
T-Mobile Nederlands, 60 where it was held that a national court is
required to apply the presumption that, where parties remain active in a
particular market where the cartel conduct took place, such undertakings
took account of the information exchanged with their competitors, unless
the undertakings concerned adduced proof to the contrary.
It was further held in T-Mobile Nederlands that what matters is not so
much the number of meetings held between the participating
undertakings as whether the meeting or meetings which took place
afforded them the opportunity to take account of the information
exchanged with their competitors in order to determine their conduct in
the market in question and knowingly substitute practical cooperation for
the risks of competition. Where it can be established that such
undertakings successfully concerted with one another and remained
active on the market, they may justifiably be called upon to adduce
evidence that that concerted action did not have any effect on their
conduct in the market in question.61
18]The court stated also that an exchange of information between
competitors is tainted with an anti -competitive object if the exchange is
capable of removing uncertainties concerning the intended conduct of the
participating undertakings.

participating undertakings.
59 Aalborg Portland A/S v Commission of the European Communities (Joined Cases
C-204/00 P, C-205/00 P, C-211/00 P, C-213/00 P, C-217/00 P and C-219/00
P) paragraphs 81-86.
60 Case C-8/08 T-Mobile Nederlands BV and others v Raad van bestuur van de Nederlandse
Mededingingsautoriteit ECJ, 4 June 2009, paragraphs 52-53.
61 Paragraphs 61-62 of the T-Mobile Nederlands case.
18

19]More recently the same approach has been followed by the European
Union’s General Court in the Denki Kagaku case. 62 Here the General
Court held that;
“A party which tacitly approves of an unlawful initiative, without publicly
distancing itself from its content or reporting it to the administrative
authorities, effectively encourages the continuation of that agreement
and compromises its discovery.”
20]In our law a contravention of section 4(1)(b) is sufficiently established if
the firms concerned are proven to have entered into one of the
agreements prohibited, even if the effects of that agreement are not
established in respect of that firm. This is also the case in European law.
Again in Denki Kagaku the Court stated:
“ According to settled case law, for the purpose of applying Article 81(1) EC, it
is sufficient, in order for an agreement to fall within its scope, that the object of
an agreement should be to restrict, prevent or distort competition, irrespective of
the actual effects of that agreement. Consequently, in the case of agreements
reached at meetings of competing undertakings, first that provision is infringed
where those meetings have such an object and are thus intended to organise
artificially the operation of the market and, second, the liability of a particular
undertaking for participation in the infringement is properly established where it
participated in those meetings with knowledge of their objective, even if it did
not proceed to implement any of these measures agreed at those meetings.” 63
21]This is also consistent with the approach we have taken in previous cartel
cases. In Pioneer 64 we observed that:
“The European Competition Commission has also stated that a party is
62 Case T-83/08, Denki Kagaku Kogyo Kabushiki Kaisha, Denka Chemicals GmbH v
European Commission [2012] at Paragraph 53
63 See Denki Kagaku case at paragraph 51.

European Commission [2012] at Paragraph 53
63 See Denki Kagaku case at paragraph 51.
64 The Competition Commission v Pioneer Food Ltd Case Numbers 15/CR/Feb07 and
50/Cr/May08 decision of 3 February 2010 at paragraph 36.
19

guilty of participating in a cartel regardless of whether that participant
actively participated in the day-to-day implementation of the agreement,
a concept which is known as the concept of “a single overall agreement”.
In the PVC decision 65 the European Commission found that all fifteen
firms in the cartel were party to the agreement even though some had
not attended every meeting or been involved in every decision made. Nor
did the fact that some members intended to deviate from the cartel
exclude them from the agreement. Their participation in the overall
agreement was sufficient to establish their guilt. This position was upheld
by the Court of First Instance. 66 The CFI in Trefileurope v Commission
also held that the fact that an undertaking does not abide by the outcome
of meetings which have a manifestly anti-competitive purpose does not
relieve it of full responsibility for its participation in the cartel, if it has not
publicly distanced itself from what was agreed in the meetings .67 In
Thuysen Steel v Commission the CFI found that attendance of meetings
that involved anti-competitive activities was enough to establish
participation in the cartel, in the absence of proof to the contrary.68
22]Vulcania’s defence that it did not contravene section 4(1)(b) because it
was passive during meetings and did not implement the agreements
reached at the meetings is rejected.
23]The next aspect of Vulcania’s defence was that the discussions held at
the meetings did not amount to agreements or understandings because
they required ratification by another meeting that of the “senior people” to
have effect. This defence, like the previous one, is bad in both fact and
law.
It is bad on fact as there is no evidence from any witness other than
Greve that agreements reached at the informal meetings required some
committee of more senior people in the firms to acquire the status of an
agreement.

committee of more senior people in the firms to acquire the status of an
agreement.
Vulcania alleged that other witnesses called by the Commission
65See Commission decision of 27 July 1994 (94/599/EC) PVC (1994) OJL 239/14.
66 LVM v Commission (Joined cases T-305/94) [1999] ECR II-931 (known as PVC II) at par
715.
67 Case T- 141/89[1995]ECR II-791.
68 Thuysen Steel v Commission [1999] CCR II-347
20

supported this version in their witness statements.69 They did not. Pierre
Griffin, who dealt most extensively with the relationship between
meetings of senior people and the other meetings, stated that senior
management would be informed of the meetings and would ‘sanction’
them.70 What Griffin was saying was that senior management permitted
these meetings – that is quite different to saying that the agreements
were subject to their subsequent approval.
Indeed the evidence of Di Nicola was that once the principals had set the
process in motion he left it to Hankey to reach agreements. This version
is also the more plausible. The ‘big’ men agreed on the need to co-
operate and the operational people discussed the specifics. Given that
Greve was both the ‘big’ man and the operational man in Vulcania, which
is a much smaller firm than the others, there would have been little point
in the cartel referring its decisions to others at a level where Vulcania was
not represented. That was the very point of having Vulcania in the
meeting-room. Nor is there evidence of report-backs from some other
group or other individuals. No decision of the operational group was, on
the evidence, ever vetoed or amended by a higher authority. Greve’s
one example of a ‘report-back’ was nothing more than a report of the
view of Rick Allen on a discount structure.71 The fact that Allen’s view
was reported reflected the fact that he had not been at the relevant
meeting (he was based in Cape Town and the cartel meetings took place
in Gauteng). We do not see this as proof that the informal meetings
could not take binding decisions.
24]Greve’s evidence on this aspect cannot be accepted.
25]Nor as a matter of law does it have substance. The Act makes it
abundantly clear that agreements amongst firms do not require the
formality of agreements in contract. The Act has extended the ordinary
definition of the term agreement when used in relation to a prohibited

definition of the term agreement when used in relation to a prohibited
practice to include “... a contract, arrangement or understanding, whether
or not legally enforceable”. It is clear that the meetings arrived at
‘understandings’ or ‘arrangements’ between competitors on customer
allocation to the effect that a member would not compete for another
firm’s customers, as well as establishing the formula for adjusting selling
prices to cater for increases in input costs. It is also clear from all the
witnesses that the firms declared their intention to implement the
decisions reached at these meetings, even though some ‘cheating’
69 See his witness statement where he states: “ It should be noted that no final decisions
were taken at these meetings ( as is confirmed in all the witness statements filed on behalf of
the Commission.”) Record page 248.
70 See Griffin statement record page 93 in particular paragraphs 18-19.
71 See transcript page 329. Noteworthy was Greve’s lack of confidence in his own conclusion
when he said after describing an this incident on which he relied to support his conclusion
that decisions at the informal meetings were never final: “ So that was the impression I had.”
21

occurred in practice.
As Greve himself conceded, Vulcania benefitted from the cartel
arrangements in that other firms ‘respected’ its customers.
Asked what he meant when he referred to a customer as allocated to him
(Vulcania) he explained:
“Apex who was my customer was allocated to me and what I mean by that is the
other guys wouldn’t ...well, they said they didn’t ever go there and try and take
the business away from me, from Apex.”72
26]Greve here testifies to the existence of an understanding. This suffices
for liability, even if ratification of some other individual had been required
by some firms before they could implement the understandings. As a
matter of fact we have found that there was no such requirement, and
that agreements reached at the meetings were implemented without
further ado, although they may be been reported to more senior people in
the participants’ groups.
Vulcania is therefore liable in that it participated in meetings with
competitors at which prices and discounts were set and customer
allocation was agreed upon.
It remains for us to determine for what period Vulcania was a member of
the cartel. As we noted earlier, Greve testified that he participated in the
informal meetings after Vulcania joined SAFRA. The minutes show that
this happened in February 2006.73 It may well be that Vulcania joined the
informal meetings earlier than this, as one of the documents purporting to
show customer allocations was dated October 2005 and reflected
customers of Vulcania. This is also consistent with the SAFRA minutes
where it was recorded that Hankey was asked in August 2005 to
approach Vulcania to join SAFRA. It is highly probable that Vulcania was
attending meetings of SAFRA in late 2005 and that the customer
allocation reflected discussions in which Greve had taken part and which
had occurred by October 2005, at least.
This means that Vulcania was a member of the cartel for at least two

This means that Vulcania was a member of the cartel for at least two
years prior to its dissolution in 2008. As we cannot be certain of that date
we will assume that this period was not much longer than two years.74
For our purposes it suffices to conclude that it was at least two years.
We thus find that Vulcania has contravened sections 4(1)(b)(i) and 4(1)
(b)(ii) of the Act from early 2006 to early 2008.
We discuss later the extent to which Vulcania’s late arrival in the cartel
and limited participation should influence the remedy imposed upon it.
PART B
72 See transcript page 327.
73 See transcript page 318.
74 Greve in oral testimony states it was in January or February 2008: transcript page 333.
22

REMEDIES
27]In this case the Commission seeks as a remedy the imposition of a
penalty of 10% of RMS’s and Vulcania’s respective annual turnovers.
This is the maximum permissible under the Act.75 Before discussing
remedies we need to deal with two initial arguments which were raised as
to why an administrative penalty, which is the remedy the Commission
seeks in respect of both respondents, is inappropriate. We consider these
two arguments respectively.
Vulcania’s initial legal argument:
An administrative penalty is not appropriate on the facts.
28]Vulcania argues that if we find it liable we ought not to impose a penalty
as a remedy, given the limited circumstances of its involvement. Whilst it
is correct that the imposition of an administrative penalty is discretionary,
this is not an appropriate case for not imposing a penalty. Cartel
contraventions, as we have noted before, are the most serious
contravention of the Act and require appropriate deterrence.76 Firms
which attend meetings with competitors where collusion takes place must
be sent a message that such activities are unlawful and are viewed very
seriously. This does not mean that we will not consider a penalty that is
proportionate to Vulcania’s limited degree of involvement in the cartel,
and we go on to consider this later after considering the legal argument
advanced by RMS.
RMS’ initial legal argument:
Firm has no turnover in relevant financial year
29]RMS contends that although it is liable in terms of the Act, a penalty
cannot be levelled on it as it had no turnover in the relevant financial year
which must be taken into account for assessing the cap on the penalty.
This argument entails an interpretation of what year is contemplated in
75 Section 59(2).
76 Pioneer case, supra, at paragraph 158.
23

the relevant section that provides for the cap, namely section 59(2).
30]That section states:
“An administrative penalty imposed in terms of subsection(1) may not
exceed 10% of the firm’s annual turnover in the Republic and its exports
from the Republic during the firm’s preceding financial year.”
31]The crisp issue is what year is contemplated in this section as the firm’s
‘preceding financial year’. RMS contends that the relevant year is the
year prior to the date of imposition of the fine by the Tribunal. Thus is if
the Tribunal were to impose its fine on the 1 st August 2011 and the firm’s
financial year ends 31 July, the “preceding financial year” would be the
year ending 31 July 2011. Conversely, if the fine had been imposed one
day earlier on 30 July 2011, the “preceding financial year” would be the
year ending 31 July 2010.
The Commission initially argued that the relevant year for the purpose of
determining what is the “preceding financial year” should be the last
financial year during which there is evidence of the infringement having
taken place.
But other candidates for the preceding financial year also exist. One
might be the year preceding the date of the initiation of the complaint, and
another the year preceding the date of the referral of the complaint.
Nevertheless, ordinary language lends some support to the approach that
the relevant year is the year preceding the imposition of the penalty. The
difficulty, of course, is to find what time or event the word ‘preceding’
refers to, and to that extent there is uncertainty or ambiguity or perhaps a
lacuna in the language of section 59(2).
The only verb in the section is ‘impose’ and hence it may seem that the
phrase ‘preceding financial year’, might qualify the term ‘impose’.
Supporting this approach is an obiter dictum from the CAC in Southern
Pipeline Contractors and Conrite Walls (Pty) Ltd v Competition
Commission77 (‘SPC’ case) where Davis JP stated:

Commission77 (‘SPC’ case) where Davis JP stated:
“Although not strictly necessary for the determination of this case, I tend to
accept the approach ... that a plain reading of section 59(2) supports a conclusion
that the base year for the determination of the cap is the financial year preceding
that in which the penalties are imposed.”78
77 Competition Appeal Court Case No. 105/CAC/Dec10.
78 See CAC SPC decision paragraph 61.
24

32]If this were so, it would follow that the contention of RMS is correct and
RMS could not be subjected to an administrative penalty because in the
relevant financial year it did not have a turnover - there is evidence before
us that the company has been dormant for several years.
This would be a most unsatisfactory outcome as it would mean that no
effective remedy can be imposed on a firm that does not trade in the
financial year that pre-dates the year of imposition of the penalty. This
case would be a perfect example. In our system, where penalties are
imposed by the Tribunal and not the Commission, the prospect that a firm
may engage in some restructuring to avoid a large penalty before the
date of imposition is not remote. Several years may pass between the
date on which a complaint is initiated (when the respondent first becomes
aware of proceedings against it) and the date on which a penalty is
imposed by the Tribunal.
In this case the Commission alleges RMS has done just that. When the
Commission originally brought the case the second respondent was cited
as Capital Africa Steel (Pty) Ltd (CAS), trading as RMS. In its answering
affidavit CAS took the point that the wrong entity had been cited.
According to Malcolm McCulloch, CAS’s executive chairman, the entity
that ought to have been cited was RMS, its wholly owned subsidiary. He
stated that the business of RMS was transferred to CAS on 30 April
2008. CAS, he stated, now conducts the business that was RMS, but was
not the entity that participated in the conduct alleged.79
In response to this the Commission amended its referral and substituted
RMS for CAS as the second respondent. That happened prior to the
commencement of the hearing. During the course of the hearing, while Di
Nicola was being cross-examined about CAS by the Commission,
counsel for RMS objected and stated that the cross-examination was
irrelevant given that CAS was no longer a respondent.80 In response

irrelevant given that CAS was no longer a respondent.80 In response
after some debate the Commission sought an adjournment and during
the adjournment period filed an amendment application to join CAS. CAS
opposed this application, but on the eve of the hearing of the amendment
application the Commission abandoned the joinder application, citing the
recent CAC decision in Loungefoam as being against it as CAS was not
the firm against which the complaint had been originally initiated. 81
As RMS was the only respondent against whom the Commission could
proceed, the question then was, did RMS have turnover in any relevant
year for the purpose of section 59(2), given that the case was being
heard in late 2011, whilst RMS had ceased trading in April 2008?
The Commission alleges that the sale of assets to CAS was nothing but a
contrived transaction by both firms to avoid liability for an administrative
79 See record pages 51-53.
80 See transcript 294 – 301.
81 In paragraph 14 of its heads of argument the Commission explained, “The decision of the
Commission to abandon the joinder application was influenced by the effect of the
Loungefoam decision, namely that a parent company that controlled a wholly owned
subsidiary .... cannot be held liable for the conduct of the subsidiary .... unless the parent
company itself faces a complaint initiated against it for its part in the alleged contravention.”
25

penalty under the Act at a time when CAS knew that the cartel was about
to be exposed.
RMS rejects this. According to both RMS and CAS (the latter in the
answering affidavit of McCulloch), the reason why the assets were
transferred was that there was a change of shareholders in CAS. The
company had previously been wholly owned by Wilson Bayley Holmes
Ovcon Limited, which now disposed of half of the equity to Brait (40%)
and Carlmac (10%). In the course of the restructuring certain subsidiary
businesses were transferred to the parent company, RMS being one of
them. CAS and RMS contend that at the time the transfer of ownership to
CAS was made they had no knowledge of any legal action against RMS
and that the restructuring was undertaken for purely commercial reasons
relevant to group considerations at the time.
It is not necessary for us, when determining the question of the correct
financial year for the imposition of the penalty, to decide whether CAS
and RMS conspired to evade the provisions of the Act or whether the
restructuring took place with no ulterior motive in order to meet genuine
commercial strategic needs. But what these facts show is that an
interpretation of the Act which means that in all circumstances the
penalty can only be levied on turnover in the financial year before the
date of imposition of the penalty is clearly susceptible to being flouted,
hence making remedies under the Act nugatory. This would be an absurd
result that would make a mockery of the Act. RMS suggested that the
only remedy that could be imposed was a declaratory order to the effect
that a contravention was found to have occurred, but that would be a
worthless remedy and in fact an invitation to other firms who suspect that
they are liable for large penalties under the Act to resort to the hasty
disposal of assets. This would defeat the purposes of the Act. Even an
interdict imposed on a firm that no longer trades would be pointless and

interdict imposed on a firm that no longer trades would be pointless and
ineffective, and would have the opposite of a deterrent effect
A better approach is the one favoured by the European authorities the
Britannia Alloys case.82 Here the Commission imposed a fine in 2001
using the firm’s 1996, as opposed to 2001, turnover as the upper limit.
The relevant European regulation required the cap to be based on the
‘preceding business year’ however the firm had not achieved any
turnover in the year preceding the Commission decision. The Court held
that the Commission was entitled to refer to another business year :
“... in order to be able to make a correct assessment of the financial resources of
that undertaking and to ensure that the fine has a sufficient deterrent effect” 83
The Court upheld the Court of First Instance’s (C.F.I.)( the predecessor of
the General Court) which explained that the calculation of the upper limit
presupposes that the Commission not only has at its disposal the
turnover for the preceding financial year but also those figures that
82 Britannia Alloys & Chemicals v Commission of the European Communities , Case No.
C76-06P Judgment of the European Court of Justice (ECJ) (Fourth Chamber) 7 June 2007.
83 Paragraph 30.
26

represent a full year of what it termed “...normal economic activity over a
period of 12 months.”
Endorsing this approach of the CFI the ECJ held that “ ...in certain
situations, the turnover of the business year preceding the adoption of
the Commission decision does not provide any useful indication as to the
actual economic situation of the undertaking concerned and the
appropriate level of fine to impose on that undertaking.” 84
33]The respondents argued that the European Courts have greater latitude
than the Tribunal does, to adopt a purposive approach, and that when
ordinary meaning is clear we cannot depart from the language of the
statute. The first part of that proposition may or may not be true, but the
proposition as a whole is undercut by the fact that the language of section
59(2) cannot with candour be described as clear. Some interpretive input
is needed for it to have rationality. But in any case our courts and others
do from time to time, when the ordinary canons of interpretation of
statutes and other documents fail them, resort to a purposive approach to
get to the mischief that is sought to be addressed by a statute or other
legal document in which the language is not clear.
Indeed our courts have been as robust as the European courts were in
Britannia in applying a purposive approach when appropriate to avoid an
absurdity. This approach was recently followed in a tax decision in
Commissioner, South African Revenue Services (SARS) v Multichoice
Africa (Pty) Ltd and another,85 where the court referred to the well known
tests adopted in earlier cases.
“In Venter v R86 Innes CJ held that a court may depart from the ordinary
meaning of the plain words of a statute where to give effect thereto
'would lead to absurdity so glaring that it could never have been
contemplated by the legislature'. 87 In a separate, concurring judgment
Solomon J held that departure from the ordinary meaning of plain words

Solomon J held that departure from the ordinary meaning of plain words
84 Britannia Alloys supra, paragraph 29.
85 (218/10) [2011] ZACSA 41 (29 March 2011).
86 Venter v R 1907 TS 910.
87 At 915.
27

in a statute is warranted if the result of a literal interpretation would be
'something which is repugnant to the intention of the legislature.”88
34]In Jaga v Donges NO and another 89 the court held that there must not
be excessive peering at the language to be interpreted without sufficient
attention to the contextual scene.
In our view the clear purpose of section 59(2) of the Competition Act is to
prevent a penalty being levied which is disproportionate in relation to the
size of the firm concerned and hence the cap imposed on turnover. Since
however the preceding financial year may not always reflect the firm’s
‘real economic situation’, as the ECJ referred to it, it is permissible to rely
on another year which reflects the firm’s turnover in a year of ‘normal
economic activity.’90
35]We thus find that in normal circumstances, when a contravention is long-
standing (e.g. of some years’ duration) and the complaint procedures
leading up to a hearing in the Tribunal have not suffered undue delay, the
meaning to be given to section 59(2) is that ‘the preceding financial year’
mentioned in that section, refers to the last completed financial year
before the imposition of the fine. Where there is for any reason no
turnover in that year or where because of some financial engineering
there is minimal turnover not reflective of the ordinary business activity of
the respondent firm during the course of the contravention, the Tribunal
may have regard to the earliest preceding year of normal turnover, to
avoid an absurdity or an outcome that would be repugnant to the
intention of the legislature.
In the case of RMS this would be the financial year ending June 2007
when RMS had a turnover of R 363,7 million. We find that this amount
may be taken into account for the purpose of determining the cap
referred to in section 59(2). There is thus turnover to which a cap on a
penalty can apply and as we consider a penalty appropriate (there was

penalty can apply and as we consider a penalty appropriate (there was
no dispute on this point) we now go on to consider how the amount of the
penalty should be determined.
88 Footnote 84 supra
89 1950(4) SA 653 (A) at 664 E-H.
90 Both the terms real economic situation and normal economic activity are used in Britannia.
See paragraphs 25-26.
28

APPROACH TO PENALTIES
36]We now consider the factors we must take into account in imposing
administrative penalties on RMS and Vulcania in terms of section 59(3) of
the Act.
We have previously recommended in SPC91 that the Commission, like its
European counterpart, adopt guidelines to its approach to the imposition
of penalties. At the time of deciding this case no such guidelines had
been published. The CAC in SPC has recommended having regard to
the EU guidelines published in 2006.92
We have done so in this decision, but adapting some features of the
approach to meet the requirements of our Act. The CAC had also noted
in SPC that the factors taken into account in the EU guidelines do not
correspond identically to the factors set out in section 59(3). For this
reason, whilst influenced by the EU approach, we have adapted it to suit
our legal framework. Where we have done so, we indicate the difference
in approach and the reason for doing so. There are some new aspects to
our approach in this decision but we have also followed past decisions.93
Our approach requires six steps. We discuss each in turn. In summary,
they are:
Step one: determination of the affected turnover in the relevant year of
assessment.
Step two: calculation of the ‘base amount,’ being that proportion of the
relevant turnover relied upon.
Step three: where the contravention exceeds one year, multiplying the
amount obtained in step 2 by the duration of the contravention.
Step four: rounding off the figure obtained in step 3, if it exceeds the cap
provided for by section 59(2).
Step five: considering factors that might mitigate or aggravate the
amount reached in step 4, by way of a discount or premium expressed as
91 Competition Commission v Southern Pipeline Contractors and Conrite Walls (Pty)Ltd Case
No. 23/CR/Feb09.
92. The CAC described the EU Guidelines, although differing to a significant extent from the

92. The CAC described the EU Guidelines, although differing to a significant extent from the
strictures of section 59(3), as presenting “...a promising basis to develop an initial calculation
of an appropriate penalty ...” The Court here appears to endorse, at least, the EU approach to
calculating the base amount and its approach to duration as a calculation of the years of
participation. See CAC SPC decision, paragraph 49.
93 For instance in Competition Commission v Federal Mogul [2003] 2 CPLR 464 we adopted
the affected turnover convention, in Competition Commission v South African Airways (Pty)
Ltd [2005] 2 CPLR 303 (CT) we approached the difference in gravity of contraventions and
followed this in Competition Commission v Pioneer Foods (Pty) Ltd 15/CR/Feb07 and
50/CR/May08. In SPC supra we looked at duration and other issues of what constituted
aggravating factors.
29

a percentage of that amount that is either subtracted from or added to it.
Step six: rounding off this amount if it exceeds the cap provided for in
section 59(2). If it does, it must be adjusted downwards so that it does not
exceed the cap, as explained by the CAC in SPC.
Step one
37]Like the EU we first determine what the affected turnover is. The affected
turnover of the respondent firm is based on sales of the products or
services that can be said to have been affected by the contravention. The
European authorities point out that an affected turnover approach is not
to be conflated with a relevant market approach – the former does not
demand the rigour or precision required of the latter.94
The year selected for this purpose is the last financial year of the period
for which we have evidence that the cartel existed.
Where contraventions occurred over several years, as they frequently do,
there is the temptation to take the affected turnover for each year of
contravention into account.
Whilst this approach might, superficially, seem the more accurate one, it
loses sight of the purpose of the overall determination which is to find a
proxy for the harm done, not an exact calculation of profits or damages.
As the authors of “Economics for Competition Law” have noted,
economic theory identifies two possible reference points to determine the
optimal level of the penalty: harm to society caused by the contravention,
and the illicit gains made by the perpetrator. In practice the difference is
not be a matter on which adjudicators need dwell. Penalties set with
reference to value of sales and duration serve as a adequate proxy for
the economic importance of the infringement. As they put it:
“The term economic importance can be interpreted as importance to either the
economy as a whole or to the perpetrators. ... But the Guidelines stop short of
actually trying to measure either the harm to the economy or the illicit gain.

actually trying to measure either the harm to the economy or the illicit gain.
Instead they apply a number of rules to approximate these effects...” 95
38] Since equivalence between these two amounts is in most cases unlikely – an
inefficient monopolist or cartelist may raise prices above the competitive level,
but not see the same amounts translate into net profits -- the affected transaction
figure is merely a rough figure that serves as a guide, with some, but by no
94 According to Bellamy and Child, “It has also been held that it [the Commission] was not
obliged to reach a precise market definition for the purpose of a fine under the 1998
Guidelines.” See Bellamy and Child, “European Community Law of Competition”, Sixth
Edition, paragraph 13.149 page 1289 and footnote 777 and cases cited therein.
95 See Gunnar Niels, Helen Jenkins, and James Kavanagh, Economics for Competition
Lawyers, Oxford, 2011, page 474.
30

means perfect correlation to harm caused or benefits gained. 96 Note that in
approaching a base year we are using it as base to build a penalty, not
assess damages. Considering each year in a multiyear cartel would entail
lengthy and futile sub-enquiries into each year’s accounting intricacies.
Further, there comes a time when duration may in the case of long
cartels be rounded off to the benefit of the respondent. An approach that
required each year to be taken into account would not allow this. Note
that the Act does not set out a formula for how duration is to be taken into
account – this is a matter of discretion.
Furthermore, the effects of the prohibited practice may not have ended by
the time the case is initiated or indeed even by its conclusion. Hence
again a precise assessment of affected turnover can never be a figure
that perfectly replicates the harm caused or illicit gains made. Finding a
base year therefore serves as a proxy for calculating a penalty. By
adopting a consistent policy regarding the year in which the turnover
should be selected – the final complete year of the cartel for which there
is evidence – a measure of certainty can be created.
Step Two
39]Once we have ascertained what makes up the affected turnover, the next
step is to calculate the ‘basic amount’ which then becomes the building
block for the penalty calculation . Determining the basic amount is again
an exercise to be performed with discretion. In the EU the basic amount
is expressed as a proportion up to a maximum of 30% of the affected
turnover.97 The more egregious the conduct, the more likely the basic
amount will tend towards the maximum. The factors taken into
consideration in determining this basic amount are the nature of the
contravention, the combined market share of the undertakings
concerned, the geographic scope, and whether or not the contravention
has been implemented.98

concerned, the geographic scope, and whether or not the contravention
has been implemented.98
96 As Niels et al go on to note, “... the total harm to the economy from cartels is typically
greater than the illicit gains made by the cartelists - the extra cartel profits are equal to the
cartel overcharge harm, but there are additional inefficiencies and volume harms caused to
suppliers and purchasers of the cartel. Therefore fines based on harm to the economy would
achieve at least as much deterrence as fines based on illicit gains (at least in the case of
cartels).” See ibid, 477-8
97 Guidelines paragraph 21.
98 Guidelines paragraph 22.
31

In cartel cases our approach to the assessment of the basic amount (i.e.
step 2), is to examine the effect of the cartel as a whole. When we get to
step 5, we examine the circumstances of the individual firms. Thus two
firms who are respondents in the same cartel case would be treated in
the same way in step two for the purpose of calculating the percentage to
be applied to their respective turnovers to derive the basic amount; but
might not be treated identically in step 5, as the individual circumstances
of the firms may be different.
Section 59(3) of the Act, which sets out the factors to be taken into
account in determining penalties, provides as follows:
“When determining an appropriate penalty, the Competition Tribunal must
consider the following factors:
the nature, duration, gravity and extent of the contravention;
any loss or damage suffered as a result of the contravention;
the behaviour of the respondent;
the market circumstances in which the contravention took place;
the level of profit derived from the contravention;
the degree to which the respondent has co-operated with the Competition
Commission and the Competition Tribunal; and
whether the respondent has previously been found in contravention of this Act.”
40]Without making the list exhaustive, the factors referred to in section 59(3)
to be considered in step 2 would be the nature, gravity and extent of the
contravention (corresponding to section 59(3)(a)), any loss or damage
suffered as a result of the contravention (section 59(3)(b)) and market
circumstances in which the contravention took place (section 59(3)(d)).
Later, in step 5, we look at sub-paragraphs (c),(f) and (g) of section 59(3),
all of which refer to the respondent specifically, as we noted above.
Although the level of profit derived from the contravention, which is a
factor to be taken into account as set out in section 59(3)(e), does not
refer to the respondent expressly, unlike sub-paragraphs (c),(f) and (g),

refer to the respondent expressly, unlike sub-paragraphs (c),(f) and (g),
such a reference is certainly there by implication, which means that this
factor could be examined at either stage 2 or 5, depending on whether
the facts were common to all firms in the cartel or differed from firm to
firm. Thus we must avoid approaching these steps in a rigid manner.
Where firms in a cartel merit different treatment in terms of the factors
taken into account in step 2, that difference may be taken into account in
32

step 5. On the facts of this case such an approach has not been
necessary.
Whilst some factors in section 59(3) are self-evident, others such as the
‘nature’, ‘gravity’ and ‘extent’ of the contravention need more elaboration
and would depend on the type of contravention being considered.
Because the factors set out in section 59(3) apply to all contraventions
listed in section 59(1) and not simply contraventions of section 4(1)(b)(i) it
follows that the application of the factors to different forms of
contravention will vary. Some contraventions concern abuse of
dominance and resale price maintenance, others concern contraventions
of merger regulation provisions and still others are a species of civil
contempt in that they apply to breaches of the Tribunal’s orders. 99 This
means that some factors will loom larger than other factors in assessing a
penalty, depending on the nature of contravention.
When we consider ‘nature’, ‘gravity’ and ‘extent’ in the context of section
4(1)(b) contraventions, we have regard to the fact that this was cartel
conduct and the nature of the cartel. Cartel conduct is considered a more
egregious form of contravention than resale price maintenance.100 When
considering extent and gravity, if it was a cartel, the extent of the cartel –
was it national or regional – how much market share did it account for,
was it consistent or sporadic in nature, are some factors to be taken into
account. The answers to these enquiries then inform an approach to the
proportion of the affected turnover which constitutes the basic amount,
which would lie somewhere on the continuum between zero and 30%.
Step three
41]Duration is provided for in the next step by multiplying the basic amount
by the number of years the contravention lasted. In this way
proportionality is recognised: long-lasting contraventions, which are more
harmful, are more heavily fined than contraventions of a shorter duration.

harmful, are more heavily fined than contraventions of a shorter duration.
This is the approach taken in the EU and was also the approach followed
by the CAC in the SPC case.
Step four
42]Here we introduce a further adjustment not provided for in the EU
Guidelines nor did it need to be considered by the CAC in SPC, but it
does arise on the facts of this case.
99 Section 59(1)(c).
100 The European Guidelines state, “Horizontal price-fixing, market sharing and outpu
limitation agreements which are usually secret, are by their very nature, among the most
harmful restrictions of competition. As a matter of policy they will be heavily fined. Therefore
the proportion of the value of sales taken into account for such infringements will generally be
set at the higher end of the scale.” (Paragraph 23).
33

If the cap on 10% of total annual turnover provided for in section 59(2) is
already exceeded at this stage, it means that adjusting the penalty for
firm-specific factors in mitigation or aggravation may prove to be pointless
since the adjustments may leave the final amount above the cap. This
outcome would offend against the principle of proportionality because
considerations that must be taken into account in determining the penalty
are rendered moot. Thus if a high proportion of a firm’s total turnover
constitutes affected turnover, if the contravention is a serious one but it is
of only medium duration – say two years or somewhat more - there is a
considerable likelihood that the amount calculated at this stage will
already exceed 10% of total turnover.
The reason why this outcome is of less concern in the EU than in South
Africa could be the result of two factors that distinguish the EU’s
approach to penalties from that of South Africa. Firstly, in the EU the cap
is based on world-wide, not EU- wide, turnover, whilst the affected
turnover from which the basic figure is derived is an EU turnover
figure.101 Furthermore, the EU will in appropriate cases, fine parent
companies for contraventions by controlled subsidiaries. Parent
companies will generally have a greater total turnover than the affected
turnover of a subsidiary. Thus on both approaches the world-wide
turnover taken into account for the cap is generally likely to exceed the
basic turnover and hence “hitting the cap” before mitigating and
aggravating factors are considered, does not normally arise in practice.
102
For this reason we must approach our statute differently to avoid this
problem. Hence we have considered it appropriate to apply an
adjustment to the basic amount already at this stage of the enquiry.
Step Five
43]Finally, once this basic amount has been calculated by following the
steps followed above, it is adjusted downwards or upwards by a

steps followed above, it is adjusted downwards or upwards by a
percentage that depends on the balance of mitigating or aggravating
factors present. In making this assessment we consider the remaining
factors set out in section 59(3), namely sub-paragraphs (c), (e), (f) and
(g). Whilst not all these factors are relevant in each case and some may
be neutral, we nevertheless have regard to them in the assessment. Of
101 See Guidelines paragraph 32. The cap is laid down in Article 23(2) of Regulation No1/2003.
102 See Wouter P.J. Wils, “ The Increased Level of EU Antitrust Fines, Judicial Review and
the European Convention on Human Rights”, World Competition Law, Volume 33 , No 1
March 2010.Wils notes that cases in which fines have been capped at the 10% ceiling have
“... remained relatively rare.” He goes on to state: “ It would indeed be very problematic if the
general level of fines were to be raised to the point where fines would be regularly capped at
the 10% ceiling, because then fines would no longer reflect the differences between
infringements , and between the participation of different undertakings in the same
infringement. Both optimal deterrence and proportional justice require differentiation, to reflect
the duration of infringements, the respective roles played by different cartel members, and
many other relevant factors.” . See footnote 37.
34

course some factors may indicate aggravation and others mitigation at
the same time. The final assessment requires both to be netted off, with
the result that there will be either an increase or a decrease in the basic
amount.
Step Six
44]Once we have applied step 5, we then ensure (again) that the amount
arrived at does not exceed the statutory cap set out in section 59(2),
namely 10% of the firm’s total turnover in the preceding financial year.
We dealt above with the question of what that year is, but note that this
does not necessarily mean that it is the same financial year as the one
used to calculate the affected turnover in step 1.
APPLICATION OF SECTION 59(3) FACTORS TO VULCANIA AND
RMS
We first consider those factors that are common to both firms and then
consider the firms individually.
Nature, gravity and extent (Vulcania and RMS)
45]Cartel activity is viewed by competition authorities as the most egregious
of all contraventions. Under the Act contraventions of section 4(1)(b)
allow no defence of justification. For this reason the penalty for a
contravention of section 4(1)(b) has to have a serious deterrent effect.
The cartel itself appears to have operated nationally although we accept
that Vulcania’s and RMS’ presence would have been limited to a more
local effect; probably within the greater Gauteng region.
The evidence of Hartnady is that not all the firms involved in the industry
were members of the cartel. This is corroborated by SAFRA’s minutes
and informal meeting notes which indicate the presence of other firms
which were in the industry but which were not part of the cartel. We can
thus assume that the cartel was more effective in the Gauteng region but
less effective nationally.
35

The gravity of Vulcania’s and RMS’s conduct is less severe than that of
Steeledale and BRC. They were not founding members of the cartel and
therefore we can infer that the cartel could and did operate without them for
some years. In this respect the evidence from the SAFRA minutes we considered
earlier indicated that the other cartel members exhibited an ambivalent attitude
toward having them as members. Whilst at one stage wanting to court new
members, SAFRA minutes show that later its members were reluctant because of
‘market circumstances’ to bring in new members. Still later they encouraged
them.
Loss or damage suffered as a result of the contravention and level
of profit derived from the contravention (Vulcania and RMS)
46]Loss or damage is difficult to prove in cartel cases where the counter-
factual – what the market might have looked like under competitive
conditions -- is not available. In this case, given the long duration of the
cartel, the difficulty of constructing the counter-factual was compounded,
and no effort was made to present it to us.
It might also have been useful to have evidence of what happened to
prices after the existence of the cartel became known.
Although the Commission applied for a postponement to lead such
evidence we did not grant the postponement for reasons we discuss later
in this decision. This means that we must accept Vulcania’s and RMS’s
version that the cartel arrangements were not lucrative and that the firms
involved did not make undue profits as a result of its existence.
There is also evidence that rebar was considered a substitute for
customers seeking an alternative form of reinforcement to wire mesh. To
some extent the installed price of rebar would have acted as a price
ceiling on the installed price of wire mesh.
Wire mesh is a commodity product where input prices comprise a very
high proportion of the final price (some witnesses stated up to 80%).
Whilst the cartel endeavoured to keep margins above the level that would

Whilst the cartel endeavoured to keep margins above the level that would
have prevailed in a competitive market, it is unlikely that the excess
would have been more than 10%.
Absent evidence from the Commission to the contrary, we will accept that
the damage suffered by customers and the excess profits gained from
the cartel by its members were not inordinate. That is not to say that
cartels constitute harmless behaviour. Firms do not collude for the sake
of collusion; they do so because the benefits of collusion are calculated to
be better than the benefits of competition between them.
Market circumstances of Vulcania and RMS
47]Both respondents were intermediaries between the selling power of the
steel mills and the buying power of some of their customers. That
36

circumstance does not excuse collusion, particularly when other firms
managed to expand in the market without joining the cartel, as Barnes
apparently did. However it does provide some context as to the financial
pressures which prevailed at that time in the mesh reinforcement sector.
We discuss later when we deal with the firms individually the particular
pressures experienced by them as opposed to other members of the
cartel.
Vulcania
Duration (Vulcania)
48]Vulcania’s evidence is that its involvement in attending cartel meetings
lasted from February 2006 to February 2008. Although it is possible this
period may have been longer, as we discussed earlier in the section on
liability, the Commission does not contest this. We can therefore accept
and there is no dispute about this that it was involved for at least two
years.
Behaviour of the respondent (Vulcania)
49]It is common cause that Vulcania entered the market with certain
disadvantages and that until it had overcome these, it was limited to
serving markets that were not of great interest to the major players.
Vulcania’s main line of defence is that it joined the informal meetings at a
time when it was vulnerable in the industry. It did not have access to
supplies of rod in coil from a steel mill and lacked the equipment
necessary to draw rod in order to become a low-cost producer.
Vulnerable to exclusion from the market, it succumbed to pressure to join
the cartel and attend its informal meetings. Once it had a secured supply
of rod in coil and had acquired and installed equipment to produce mesh
from rod in coil, it alleges it ceased attending the informal meetings.
Whilst this factor of perceived coercion will be taken into account in
mitigation, its extent as a mitigating factor is limited. All new firms face
difficulties entering markets and resistance from incumbents is one of
them. This does not justify joining a cartel.
37

Vulcania’s second plank of its defence is that it was passive at the five or
six meetings that it attended. This version is contradicted by the
Commission’s witnesses and in particular the incident with Cawood.
Whatever Greve’s personal reservations were, he did not express his
reluctance to the others nor did they have any other reason to perceive it.
On the contrary, the other firms, having brought Vulcania into the
conspiracy, presumably because they considered it enough of a threat,
had every reason to believe that it would not be a disruptive force in the
market. On the contrary they acted on the assumption that it would abide
by the customer allocations that had been agreed upon, given its regular
attendance at meetings during this period and its acquiescence at those
meetings regarding matters of customer allocation.
We accept however that Vulcania played a minor and less active role in
these meetings than did other firms. There is no evidence that it initiated
any of the cartel’s activities.103
Another important aspect of the Vulcania’s defence is that it quietly defied
cartel decisions rather than implementing them. There is again no
evidence to counter Greve’s testimony that it did not implement the
decisions.
Importantly for Vulcania, its assertion that it did not respect the cartel
arrangements was supported by witnesses called by the Commission. Hartnady
in his evidence in chief said that certain players did not regard the market
allocation list “...as a serious document” and he expressly included
Vulcania in this category.104
There is also some contemporaneous supporting documentary evidence.
In a Steeledale marketing plan document dated March 2007, Steeledale
remarked that certain competitors’ market share had grown because of
alliances with their former franchisees. The competitors mentioned were
RMS and Vulcania. It was also mentioned that the entry of those two
firms into the Specimesh market had had an adverse impact on

firms into the Specimesh market had had an adverse impact on
Steeledale’s growth and that price levels were lower than anticipated.105
However even if Vulcania sold to customers allocated by the cartel to
other members this does not seem to have been on a scale significant
enough to attract the attention or at least the wrath of the other members.
There seems to have been no manifest disruption of the customer
allocations and no upsetting of the cartel’s prices. There is no evidence
that the other firms punished Vulcania for non-compliance. Nor did Greve
testify that other cartel members ever competed for Vulcania’s
customers. As he put it:
“We were under the radar and we grew our business and we managed to not
upset them.”106
103 See Denki Kagaku supra. Note that under the Guidelines, the court observed, the
Commission no longer regards passive attendance as a mitigating factor. See Denki
paragraph 253. The court noted that although this was a mitigating feature under the 1998
Guidelines it was no longer a circumstance to be taken into account in the 2006 Guidelines.
The court said this reflected a deliberate choice by the Commission to no longer encourage
passive conduct by those participating in a contravention.
104 See transcript page 173.
105 Discovery file 1071. Steeledale Mesh marketing plan 2007-8.
106 Transcript page 332.
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50]Whilst we have some regard to the mitigating fact that Vulcania did not
implement, or at least fully implement, the cartel’s agreements, Vulcania’s
conduct did not seriously impede the cartel arrangements. This factor
accordingly constitutes only minor mitigation.
Another plank to Vulcania’s mitigation argument is that it withdrew from
the cartel as soon as it was self-sufficient in its supplies of rod in coil.
However Greve has given inconsistent evidence on this point. In his
witness statement he stated that as soon as Vulcania became self-
sufficient it ceased attending meetings.107 In his evidence in chief, he,
unsolicited, suggested that the last meeting he attended was the last of
the cartel’s informal meetings. The implication of this answer is that
Vulcania did not withdraw from the cartel prior to its demise – the cartel
ended of its own accord when a leniency application was made. 108
Later, when responding to a question from Vulcania’s counsel whether he went
to any further meetings, Greve’s answer, contradicting the prior one, was that
there would have been no point: it would have been a waste of time as “...we
could stand on our own two feet at any stage.”109 This answer suggests
that his last meeting was not the cartel’s last meeting, but that Vulcania
did withdraw prior to the dissolution of the cartel, albeit at a very late
hour.110
Fortunately for Vulcania the Commission has not challenged Greve’s
evidence on this point. We will therefore accept that despite this
inconsistency in his oral testimony, the version given by Greve in his
witness statement is the correct one and that Vulcania withdrew from
cartel meetings prior to the end of the informal meetings, because its
supply was now secure and it was no longer vulnerable to exclusion by
its rivals . We recognise this as an important mitigating factor.
To offset this mitigating behaviour there is one aggravating feature. This
is that Greve, the most senior person in the company, partook in cartel

is that Greve, the most senior person in the company, partook in cartel
activities. The Office of Fair Trading in the United Kingdom takes into
account, in determining penalties, whether senior management
participated in the cartel meetings and it lists such participation as an
aggravating factor in determining the appropriate penalty amount for
cartel activity.111 There is no reason not to follow such an approach in
our law. In Vulcania’s case, Greve was the chief executive officer at the
relevant time and this makes its participation in the meetings more
serious.
Level of profitability of Vulcania
107 Record page 253.
108 Transcript page 333. The question was, do you recall when the last informal meeting took
place? Greve answered around January or February 2008. He was then asked if that was the
last meeting of the members and he answers – “ As far as I know, yes”
109 Transcript page 334.
110 Fortunately for Vulcania this coincides with the time the informal meetings ceased for all.
Hartnady in his witness statement states that the last informal meeting took place in February 2008:
(record page 135).
111 The Office of Fair Trading Guidelines, OFT's Guidance as to the Appropriate Amount of a
Penalty: Understanding Competition Law [2004] at paragraph 2.15, page 9.
39

51]Little is known to the Tribunal on this topic. Vulcania asserted that it did
not derive any benefit from the cartel arrangement. The Commission
argued that Vulcania benefited from not having the other members of the
cartel compete for its customers, meaning that Vulcania did not have to
lower its prices when selling to its customers. Vulcania did not give
evidence of why its level of profitability might have been lower than that of
the other cartel members nor did the Commission show that profits were
higher than they might have been in a competitive market.
Degree to which Vulcania has co-operated with the Commission and
Tribunal
Vulcania has shown no special co-operation in this case. It has not
offered information beyond that which the law required it to give. On the
other hand, the fact that it has defended itself in these proceedings in the
limited fashion that has been outlined above cannot be considered as an
aggravating factor, and the Commission’s suggestion to that effect must
be rejected. This factor is therefore a neutral one, neither aggravating nor
mitigating Vulcania’s conduct.
Whether the respondent had previously been found in contravention
of the Act. (Vulcania)
52]Vulcania has not previously been found to have contravened the Act.
RMS
Duration
53] We have found that RMS took part in the cartel for at least four years. This is
not seriously contested by RMS.
Conduct of RMS
54]In assessing RMS’s conduct we have to take into account both
aggravating and mitigating factors.
The first aggravating aspect to RMS’s conduct is that despite the fact that
SAFRA members were warned in 2005 by Mr McDonald, an attorney,
that these activities were illegal, RMS, along with the other cartel
40

members, continued with them, and moreover moved the price
discussions into informal meetings to keep them secret. RMS was aware
of McDonald’s warning as it was a member of SAFRA at the time. (We
cannot make the some assumption about Vulcania, which only joined
SAFRA in February 2006 and may not have known about McDonald’s
advice.)
Another aggravating feature of RMS’s conduct was the involvement of
senior management. RMS commenced involvement when its chairman,
Di Nicola, was approached by others to attend meetings where inter alia
market division was to be discussed, and consented to this. Hankey, the
chief executive officer, later joined discussions at the informal meetings.
Hankey was both a shareholder and director of the RMS business.112
Thus RMS was party to discussions on market division, customer
allocation and price setting. Its involvement during this period was as a
full participant in the full range of the cartel’s activities.
However there is also some evidence that mitigates RMS’s conduct.
First, as with Vulcania, there was some evidence of coercion. Whilst the
coercion was not as strong as that applied to Vulcania there was
pressure from the other cartel members to join the cartel at a time when
RMS’s supply arrangements were not yet secure and RMS had difficulty
in obtaining the required equipment from Clifford Engineering.
More persuasively in RMS’s favour is that it attempted to disrupt the
cartel both before it joined and later as a member. RMS’s own evidence
to that effect was supported by contemporaneous sources from other
parties.
An internal Steeledale marketing document dated February 2005 records
the following:
“The anticipated impact of Reinforcing and Mesh Solutions entering the market
has been grossly under-estimated with tonnages being lost to them particularly
via the steel merchants and large contractors. The company is at present on a
major national expansion drive, buying market share in most regions.”113

major national expansion drive, buying market share in most regions.”113
55]There is also evidence that RMS was punished for undercutting the cartel
and was forced to make amends. Hankey testified that he had sold mesh
to a customer of Aveng and he was forced to buy the same volume from
Steeledale at the list price without a discount.114
Level of profitability of RMS
56]RMS stated that at its highest its profitability was 10%. Therefore it did
not excessively profit and hence the damage caused by its participation
112 Transcript page 269.
113 See D 1018. Steeledale Mesh Marketing plan 2005-6, subtitled ‘market situation analysis
– February 2005’.
114 Transcript page 244.
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in the cartel was correspondingly limited.
Degree to which RMS has co-operated with the Commission and
Tribunal
57]Like Vulcania, RMS has shown no special co-operation in this case. It
has not offered information beyond that which the law required it to give.
Information that it gave the Commission to the effect that that RMS and
not CAS was the offending party, has proved self-serving. Again, the fact
that it has defended itself in these proceedings in the limited fashion that
it has, cannot be considered as an aggravating factor, contrary to the
Commission’s suggestion. This factor is therefore a neutral one and
neither aggravates nor mitigates the contravention for the purposes of
determining the penalty to be imposed.
Whether the respondent had previously been found in contravention of the Act.
58]RMS has not been found to have previously contravened the Act.
PENALTY CALCULATIONS
Penalty calculation in respect of Vulcania
59]Vulcania asserted that the last full financial year in which it participated in
the cartel was the financial year ending 31 December 2007. We know
that Vulcania continued to participate in the cartel for some period during
2008, but this ended in January of that year. Therefore we accept the
calendar year 2007 as the correct year for the purpose of assessing the
penalty.115 Vulcania has provided figures to the Tribunal indicating that
its turnover for reinforced wire mesh for the financial year ending
115 This is to Vulcania’s advantage, as its affected turnover increased in the 2008 year end
by nearly 40 %.
42

February 2007 was R 31,6 million rand.116
If the maximum proportion for this calculation by the EU is used as a
guideline (recall that the EU applies a maximum penalty of 30% in the
most serious cases) we would regard this contravention as one for which
15% would be an appropriate figure. This gives a basic figure of R4,74
million (31,6x15%). This figure of 4,74 is then multiplied by 2, to provide
for the two-year length of Vulcania’s participation. This leads to a figure
of R9,48 million.
However we have accepted the reasoning that Vulcania was not an
instigator, that it was in some respects coerced to join, that it left of its
own accord before the cartel was detected, that it profited little and
caused little damage by its participation, that it refrained from
implementing cartel decisions, and that at times it may have disrupted the
cartel’s effectiveness. Cumulatively these factors mean that this penalty
can be substantially reduced. The one aggravating feature in its conduct
is the presence of its most senior manager at the cartel meetings. For
these reasons the mitigating factors set out in section 59(3) lead to a
reduction of 40% in the basic amount. This gives a final figure, as
rounded off, of R5,6 million.
This amount does not exceed the 10% annual turnover of Vulcania for
either 2010 or 2011 and therefore does not need to be rounded down in
order to fall below the cap.117
Vulcania ran at a loss in 2010 although it was profitable for the 2011
financial year. Given this financial background we shall allow 50% of the
fine be paid within 60 business days of the date this decision and the
balance not more than a year later.
Penalty calculation in respect of RMS
60]The relevant year for RMS will be its financial year ending June 2007 as
this represents the last complete year of cartel behaviour, given that the
cartel is alleged to have ended in early 2008. The figure for RMS’s
turnover in wire mesh was given by the Commission as R62 million. The

turnover in wire mesh was given by the Commission as R62 million. The
Commission distinguished between turnover for mesh and hard drawn
wire. As we are not certain from the submission if hard drawn wire was
part of the affected turnover we shall give RMS the benefit of the doubt
and restrict the affected turnover figure to R62 million.
We apply the base percentage of 15% to this figure. This is the same as
was done for Vulcania as its circumstances are the same in this respect.
This gives a figure of R9,3 million. Multiplying this amount by four to take
116 Affected turnover was R 43 392 267. See for turnover figures trial bundle 2391 and 2412.
117 Vulcania’s total revenue was R 185 million in 2010 and R 183 million in 2011. These
figures were provided by Vulcania’s attorney in correspondence subsequent to the conclusion
of the hearing.
43

account of the duration of RMS’s participation in the cartel, takes us to a
figure of R37,2 million.
This amount is in excess of 10% of the turnover for the 2007 financial
year, which was R363 million. A proportion of 10% of this amount is R36
million. We therefore round down to R36 million.
Taking into account both mitigating and aggravating features we consider
that on balance, the mitigating evidence, particularly the evidence that
RMS disrupted the cartel, both prior to joining the cartel and during its
period of involvement, outweighs the aggravating evidence. We find that
this would justify reducing the basic amount by 40%, leading to a penalty
of R21,6 million. This is the same discount as applied to Vulcania. In
RMS’s case although there is more aggravating evidence present, the
mitigating evidence of disruption is much stronger; hence on balance it
receives the same discount.
The application for postponement
On the 6th of August 2011 the Commission applied for a
postponement118 of the matter in order for it to be allowed to investigate
certain matters that relate to the level of the penalty to be imposed in
terms of section 59.
The application had followed the release of the CAC decision in SPC.
The Commission argued that the decision meant it had to lead evidence it
was otherwise from past practice not expected to lead, concerning certain
factors set out in section 59(3), in particular evidence concerning loss or
damage as a result of the contravention and the level of profit derived
from the contravention. The Commission argued that in the past such
evidence had been presumed flowing from a finding of liability and the
Commission was not required to lead any further evidence on these
issues.
61]The application was opposed by both respondents. We decided to refuse
the postponement.
62]The application was made late in the day in what have been already
protracted proceedings, at a time when all parties were ready to present

protracted proceedings, at a time when all parties were ready to present
final argument. The respondents would have been severely prejudiced
from further delay which could not have been remedied by a costs order
given that we do not make costs orders in prohibited practice cases
brought by the Commission.
Secondly, it was not clear whether the Commission would obtain
evidence that it intended to lead. Its application was to enable it to further
investigate to see if it could obtain such evidence. Thus we had no
confidence that the postponement would yield any new evidence on
these issues. Nor do we accept that the approach of the CAC was novel
or should have come as a surprise. If the Commission was able to obtain
such evidence during its investigation of the cartel it should have done
118 The application was heard on 8 August 2011 prior to the hearing of closing arguments.
44

so.
Thirdly, the respondents are, as we have noted, the smallest players in
this cartel. They stand the most to lose by a further postponement, whilst
given their lack of centrality to the cartel, the administration of justice has
little to gain by postponing proceedings against them further.
63]For these reasons we consider that the application for postponement was
not well founded and it was refused.
ORDER
1. Vulcania is found to have contravened section 4(1)(b)(i) and 4(1)(b)(ii) of
the Act for a period of two years from January 2006 to January 2008;
2. Vulcania is ordered to pay an administrative penalty of R5,6 million. Of
this amount, R2,8 million is to be paid within 60 business days of the date
of this order, and the balance within one year of the date of the first
payment, but no later than one year and 60 days after the date of this
order .
3. RMS is found to have contravened section 4(1)(b)(i) and 4(1)(b)(ii) of the
Act for a period of four years from January 2004 to January 2008;
4. RMS is ordered to pay an administrative penalty of R21,6 million. Of this
amount, R10,8 million is to be paid within 60 business days of the date of
this order, the balance to be paid within one year of the date of the first
payment but no later than one year and 60 days after the date of this
order.
5. There is no order as to costs.
____________________ 7 May 2012
Norman Manoim Date
45

Lawrence Reyburn and Medi Mokuena concurring.
Tribunal Researcher: Songezo Ralarala
For the Applicant / Commission: NH Maenetje SC and DG Ngcangisa
instructed by the State Attorney.
For the 2nd Respondent: MJ Engelbrecht instructed by N Altini of Cliffe
Dekker Hofmeyr Attorneys.
For the 3rd Respondent: JPV McNally SC instructed by C Artemides of
Christelis Artemides Attorneys.
46