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[2012] ZACT 40
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Competition Commission v Oceana Group Ltd and Another (50/CR/May12) [2012] ZACT 40; [2012] 2 CPLR 237 (CT) (19 June 2012)
COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 50/CR/May12 015024
In the matter between:
The Competition Commission
….......................................................................................
Applicant
and
Oceana Group Ltd
…............................................................................................
First
Respondent
Oceana Brands Ltd
…......................................................................................
Second
Respondent
Panel: N Manoim (Presiding Member),
Y Carrim (Tribunal Member) and
A Wessels (Tribunal Member)
Heard on: 19 June 2012
Decided on : 19 June 2012
Order
The Tribunal hereby confirms the order as agreed to and
proposed by the Competition Commission and the respondent, annexed
hereto
marked "A".
Presiding Member N Manoim
Concurring:
Y
Carrim and A Wessels
IN THE COMPETITION TRIBUNAL OF
SOUTH AFRICA
CT Case No;_
CC Case No.; 2008JUL3827
In the matter between:
COMPETITION
COMMISSION
…...................................................................................
Applicant
and
OCEANA GROUP LIMITED
….............................................................
First
Respondent
OCEANA BRANDS LIMITED
….......................................................
Second
Respondent
CONSENT AGREEMENT BETWEEN THE
COMPETITION COMMISSION, OCEANA BRANDS LIMITED AND OCEANA GROUP
LIMITED IN RESPECT OF AN ALLEGED CONTRAVENTION
OF SECTIONS 4(1)(b)(i)
AND
4
(1)(b)(ii)
OF THE COMPETITION ACT, 1998 (ACT NO. 89 OF 1998), AS AMENDED
The Competition Commission
("'Commission"), Oceana Group Limited ("Oceana
Group")
and Oceana Brands
Limited ("Oceana Brands") (collectively "Oceana")
hereby agree that application be made to
the Competition Tribunal
("Tribunal")
for confirmation of
this Consent Agreement as an order of the Tribunal in terms of
section 49D as read with sections 58(1)(b) and
section 59(1 )(a) of
the Competition Act, 1998 (Act No. 89 of 1998), as amended, on the
terms set out below:
1.
Definitions
For the purposes of tiiis Consent Agreement the
following definitions shall apply:
1.1. "Act" means the Competition Act, 1998
(Act No. 89 of 1998), as amended;
12.
"Commission"
means the
Competition Commission of South Africa, a statutory body established
in terms of section 19 of the Act, with its principal
place of
business at 1
st
Floor, Mulayo Building (Block C)
s
the DTI Campus, 77 Memoes Street
Sunnyside, Pretoria Gauteng;
1.3
'"Commissioner"
means the
Commissioner of the Commission, appointed in terms of section 22 of
the Act;
14. "Complaint" means the complaint initiated
by the Commissioner in terms of section 49B of the Act under case
number
2008Jul3827 (as extended);
1.5. "Consent Agreement"
means this
agreement duly signed and concluded between the Commission and
Oceana;
1.6. "Oceana" means Oceana Group Limited and
its wholly owned subsidiary, Oceana Brands Limited;
1.7. "Oceana Brands" means
Oceana Brands Limited, a wholly owned subsidiary of Oceana Group
Limited, a company duly incorporated
and registered in terms of the
company laws of South Africa, with its principal place of business at
7
th
Floor, Oceana House, 25 Jan Smuts
Street Foreshore, Cape Town 8001;
1.8. "Oceana Group" means
Oceana Group Limited, a company duly incorporated and registered in
terms of the company laws
of South Africa, with its principal place
of business at 7
th
Floor, Oceana House, 25 Jan Smuts
Street Foreshore, Cape Town 8001;
1.9. "Parties" means the Commission and
Oceana;
110.
"Respondents"
means the firms
against whom an investigation was initiated, being Oceana Group,
Foodcorp (Pty) Ltd ("Foodcorp*), Premier Fishing
SA (Pty) Ltd
("Premier Fishing"), Gansbaai Marine (Pty) Ltd
("Gansbaai-Marine"), the
South
African Pelagic Fish Processors Association ("SAPFPA") and
the South African Pelagic Fishing Industry Association
("SAPFIA"),
Pioneer Fishing (Pty) Ltd ("Pioneer Fishing"), Saldanha
Foods (Pty) Ltd, West Point Processors
(Pty)Ltd, West Point Fishing
Company (Pty) Ltd, Saldanha Bay Canning Co (Pty) Ltd ( collectively
referred to as "Saldanha
Foods""), SA
Vismeeibemarkings Maatskappy (Pty) Ltd ("SAVM"), South
African Deep Sea Trawling Association and
Sea Harvest Corporation
(Pty) Ltd ("Sea Harvest") Terresan Pelagic Fishing (Pty)
Ltd ("Terresan") Paternoster
Visserye (Pty) Ltd
("Paternoster Visserye"), Tiger Brands Limrted ("Tiger
Brands") and Brimstone Corporation
Investments Ltd
("Brimstone").
2. The Complaint
and
Complaint
Investigation
2.1. On 8 July 2008 the Commissioner initiated an
investigation against Oceana Group, Foodcorp, Premier Fishing,
Gansbaai Marine,
SAPFPA and SAPFIA in respect of allegations that the
above mentioned entities engaged in price fixing and/or the fixing of
trading
conditions and/or market allocation in contravention of
section 4(1)(b) of the Act in respect of pelagic fish. Pelagic fish
comprises
three species of fish namely anchovy, pilchards and red
eye.
2.2. On 19 January 2010, the Commission extended the
Complaint to include additional respondents, namely Pioneer Fishing,
Saldanha
Bay Canning, SAVM, SA Deep Sea Trawling Association and Sea
Harvest. The Commission also supplemented Its complaint with
allegations
that the Respondents had entered into exclusive supply
agreements with trawlers for the supply of pelagic fish, in
contravention
of sections 5(1), 8(c) and 8(d)(i) of the Act as well
as with an allegation of market allocation involving Oceana Group and
Sea
Harvest.
2.3. On 23 March 2012 the Commission further extended
the Complaint to include additional respondents, namely Saldanha
Foods (Pty)
Ltd, West Point Processors (Pty)Ltd, West Point Fishing
Company (Pty) Ltd, Terresan Pelagic Fishing (Pty) Ltd Paternoster
Visserye
(Pty) Ltd, Tiger Brands Limited and Brimstone Corporation
Investments Ltd. At the conclusion of its investigation of the above
complaints, the Commission found that:
2.3.1.
Raw
fish price formula
2.3.1.1. There has been a longstanding and open practice
within the small pelagic fish industry for factory owners, vessel
owners
/ operators, skippers and crew (all acting through their
respective representative bodies) to agree an industry wide formula
linking
the payment of boat owners, skippers and crew to an average
annual fishmeal price achieved within the industry ("the raw
fish
price formula").
2.3.1.2. Oceana Brands, Foodcorp, Premier Fishing SA,
Gansbaai Marine, Terresan, Paternoster Visserye, Pioneer Fishing and
Saldanha
Foods are all active in the market for processing pelagic
fish into canned fish and/or fish meal and are therefore in a
horizontal
relationship in terms of the Act.
2.3.13. Oceana Brands, Foodcorp,
Premier Fishing SA, Terresan
f
Paternoster Visserye, Pioneer Fishing
and Saldanha Foods are vertically integrated and ihey also compete in
the upstream market
for catching pelagic fish.
2.3.1.4. The above firms are members
of SAPFPA. During 1999 to 2010 they, in meetings of SAPFPA and
through correspondence distributed
by SAPFPA to its members, took
decisions to implement the historical raw fish price formula (as had
been agreed with vessel owners
/ operators, skippers and crew) as
payment for the service of catching raw pelagiG fish as follows:
2.3.1.4.3.1. SAVM calculates the average fish meal price
achieved during the preceding calendar year and circulates it
annually
to SAPFPA and its members.
2.3.1 4
.
3.2. The raw
fish price is calculated by SAVM and comprises an amount equal to 11%
of the average fish meal price achieved during
a calendar year and
the result of the calculation is provided to SAPFPA and communicated
to its members and to the representative
bodies for vessel owners,
skippers and crew.
2.3.1 4
.
3.3. This 11
% formula comprises the following basic elements:
2.3.1 4
.
3.1. 4.8825%
for baste payment to the skipper and crew of a vessel and;
2.3.1 4
.
3.2. 6.1175%
for payment to boat owners;
2.3.1.5. All the market participants
used the 11% raw fish price formula in respect of payment for the
service of catching pelagic
fish during the period of 1999 to 2010
whether they attended the SAPFPA meetings or not. However, during
2008 Oceana introduced
its own payment mechanism for private boat
owners (which was not based on the industry average annual
realisation for a ton of
fishmeal as announced by SAPFPA). Other
market participants still use the 11% formula to date.
2.3.1.6. In addition to the fixing of the raw fish price
formula, the factory owners, vessel owners / operators, skippers and
crew
(all acting through their respective representative bodies) also
agreed to associated trading conditions, namely the so-called
"voorskof and "agterskot" payments. In effect these
were agreements in respect of advance and catch up payments,
which
were also published by SAPFPA and that a canned fish bonus would be
payable. This, however, differed from processor to processor.
2.3.1.7. In the course of the SAPFPA
meetings and negotiations with the representative bodies of vessel
owners, skippers and crew,
Gompetifrvely. sensitive information was
exchanged. This facilitated agreement in respect of the raw fish
price formula and its
implementation.
2.3.1.8. The above conduct amounts to
a contravention of section 4(1)(b)(i) in that the parties agreed to
fix the prices payable
to vessel owners/ operators, skippers and crew
for the services provided by each in the catching of pelagic fish.
This was accomplished
by continuing to implement the raw' fish price
formula as a basis for determining the amounts payable for the
services rendered
by the vessel owners/operators, skippers and crew.
2.3.2
Price
Fixing in Respect of Quota
2.3.2.1. Oceana Brands and Pioneer Fishing are, as
previously mentioned, both active in the market for processing
pelagic fish
as well as the upstream market for catching pelagic
fish and therefore in a horizontal relationship in terms of the Act.
2.3.2.2. During 2006 an agreement was reached between
Oceana and Pioneer Fishing to fix the quota rental fees negotiated
by Mr
Redan de Maine acting on behalf of three quota holding
companies in Port Elizabeth in respect of the use of their pilchard
quota
for the 2006 fishing season
2
.
3.2.3. The
above conduct amounts to a contravention of section 4(1)(b){i).
2.3.3.
Fixing
of Prices for Canned Fish
2.3.3.1. Over a period of time Oceana purchased canned
pilchards from its competitors Pioneer Fishing, Premier Fishing and
Saldanha
Bay Canning, and when doing so it frequently agreed to a
pricing mechanism separately with each of the 3 above competitors
which
linked the ex -factory purchase price to Oceana's list price
for the sale of canned product.
2.3.3.2. As a consequence of this pricing mechanism
Oceana was required to exchange competitively sensitive information
regarding
market conditions, the list price for its products and the
dates for effective list and purchase price increases with "rts
competitors in the market for processing canned fish and they in
turn provided similarly competitively sensitive information
to
Oceana. These arrangements over time enhanced the risk of price
rigidity in the downstream canned pilchard market.
2.3.3.3. "The purchase of canned pilchard using
this mechanism took piace between 2001 and 2009 and amounts to a
contravention
of section 4(1)(h)(i) in that the agreements between
the parties and the subsequent sharing of sensitive information gave
rise
to an indirect fixing of the price for canned fish.
2.3.4.
Non-compete
Agreement
2.3.4.1. During its consideration of a merger in 2008
(Competition Tribunal Case No. 13G/LM/Dec08) where Brimstone
Investment
Corporation Limited ("Brimstone"), through a
wholly owned subsidiary catled Business Venture, was increasing its
stake
in Sea Harvest from 21.52% premerger to 56.94% post merger, it
came to the Commission's attention that there was an agreement
concluded in 2000 between Tiger Brands Limited ("Tiger"),
Brimstone, Sea Harvest and other shareholders of Sea Harvest
which
contained provisions constraining competition between Tiger,
Brimstone and Sea Harvest.
2.3.4.2. The agreement prevents Brimstone and its
subsidiaries from venturing into any market in which Sea Harvest is
active.
This agreement may have prevented Oceana from expanding into
Sea Harvest's terrain. Brimstone had a controlling stake in Oceana.
2.3.4.3. Oceana and Sea Harvest have both Tiger and
Brimstone as common substantial shareholders. In terms of section
4(2) of
the Act they are presumed to have engaged in a horizontal
practice.
2.3.4.4. Further, Oceana and Sea Harvest have, during
the period 2000 to 2008 implemented the non-compete agreement
concluded
between Tiger and Brimstone. This conduct is in
contravention of section 4(1)(b)(ii) of the Act.
2.3.5. Market Allocation in Respect of Suppliers
2.3.5.1. Oceana Brands and Pioneer Fishing are both
active in the market for processing pelagic fish as well as the
upstream market
for catching pelagic fish and are therefore in a
horizontal relationship in terms of the Act.
2.3.5.2. In 20Q6 Pioneer and Oceana Brands reached an
agreement that they would not compete with regard to each other's
suppliers
of fish in the Mossel Bay region. Specifically it was
agreed that the poaching of Pioneer's fish suppliers in Mossel Bay
by Oceana
was to be avoided so that Pioneer could meet its prior
commitment to supply a quantity of canned product" to Oceana
Brands.
2.3.5.3. This conduct amounts to a contravention of
section 4(1){b)(ii) of the Act in that the parties agreed to divide
markets
by allocating suppliers in Mossel Bay,
3.
Admissions
by Oceana
3.1. Oceana Brands admits it was party to the conduct
described in 2.3.1,2.3.2,2.3.3 and 2.3.5, and that its involvement
therein
contravened section 4(1)(b) of the Act.
3.2. With regard to the Commission's findings described
in paragraph 2.3.4, Oceana Group admits that Tiger and Brimstone are
both
substantial shareholders of Oceana Group, and that Tiger
and^rimstone are party to the Shareholders' Agreement referred to in
paraa^apji 2.3.4,1.
4.
Administrative
penalty
4.1. Oceana Brands is liable for and has agreed to pay
an administrative penalty sections 58(1)(a)(iii) as read with
sections
59(1)(a), 59(2) and 59(3} of the Act, in the amount of R34
750 050 (thirty-four million, seven hundred and fifty thousand and
fifty Rands). The administrative penalty represents 5% of Oceana
Brands' affected turnover derived from the pelagic fish operations
in South Africa in the 2010 financial year.
4.2. Oceana Brands will pay the amount set in paragraph
4.1 to the Commission within 3 (three) months of the date of
confirmation
of this Consent Agreement as an order of the Tribunal,
4.3. This payment shaif be made to the Commission's
bank account, details of which are as follows:
BANK NAME: ABSA BANK BRANCH NAME: PRETORIA
ACCOUNT HOLDER; COMPETITION COMMISSION FEES ACCOUNT
ACCOUNT NUMBER: 4050778576 ACCOUNT TYPE; CURRENT ACCOUNT BRANCH
CODE: 323
345
The payment will be paid by the Commission to the
National Revenue Fund in accordance with section 59(4) of the Act.
5.
Agreement
concerning
future
conduct
5.1.
Oceana
agrees to fully cooperate with the Commission in relation to
the
prosecution of the Complaint upon referral. Without limiting
the generality of the
foregoing, Oceana specifically agrees to:
5.1.1. testify in the complaint
referral in respect
of
alleged
contraventions covered by this Consent Agreement; and
5.1.2. provide witnesses to testify in the complaint
referral (if any) in respect of alleged contraventions covered by
this Consent
Agreement; and
5.1.3. to the extent that it is in existence, provide
evidence, written or otherwise, which is in its possession or under
its
control, concerning the alleged contraventions contained in this
Consent Agreement
5.2. Oceana records that it has ceased its
participation in the conduct as described herein and agrees that it
will in future
refrain from conduct that may give rise to a
contravention of section 4(1 )(b) of the Act.
5.3. For this purpose, Oceana has developed,
implemented and is monitoring a competition law compliance programme
incorporating
corporate governance designed to ensure that its
employees, management, directors and agents do not engage in future
contraventions
of the Act.
5.4. Oceana will submit a copy of its compliance
programme to the Commission within 30 (thirty) days of the date of
confirmation
of the Consent Agreement by the Tribunal.
6. Full and Final Settlement
This Consent Agreement, upon confirmation as an order
by the Tribunal, is in full and final settlement, between the
Commission
and Oceana, of all proceedings investigated by the
Commission under case number 2008JUL3827 (as extended).
Dated
and signed at Cape Town on the 11
th
day of April 2012
For
Oceans
Francois
Kuttel
Chief
Executive Officer Oceana Group
Dated
and signed at Pretoria on the 13
th
day of April 2012
For the
Commission
Shan
Ramburuth
Competition
Commissioner