Competition Commission v Trident Steel (Pty) Ltd (114/CR/Dec12) [2012] ZACT 104; [2013] 1 CPLR 112 (CT) (19 December 2012)

75 Reportability

Competition Law

Brief Summary

Competition Law — Price Fixing — Agreement between Competition Commission and Trident Steel (Pty) Ltd — Trident admitting to engaging in price fixing in contravention of section 4(1)(b)(i) of the Competition Act — Tribunal confirming consent order and imposing an administrative penalty of R8,563,835.65 — Trident to implement compliance program to prevent future contraventions.

Comprehensive Summary

Summary of Judgment

1. Introduction

These proceedings were consent order proceedings before the Competition Tribunal of South Africa, in which the Tribunal was asked to confirm an agreement concluded between the Competition Commission (as applicant) and Trident Steel (Pty) Ltd (as respondent) as an order of the Tribunal.

The matter arose from a competition law investigation and complaint concerning alleged price fixing and fixing of trading conditions in relation to certain steel products. The Commission’s investigation was initiated following a corporate leniency application by Macsteel Service Centres SA (Pty) Ltd. The prohibited practices related to steel products manufactured by Evraz Highveld Steel and Vanadium Ltd and sold for export into the Africa Overland Market (AOM), as well as a premium charged to domestic resellers and wholesalers in specified circumstances.

Procedurally, the Tribunal heard and decided the matter on 19 December 2012. The Tribunal issued an order confirming the parties’ agreement as a consent order, subject to a proviso regarding the time period for payment of the agreed administrative penalty.

2. Material Facts

The Commission received a leniency application on 24 June 2009 from Macsteel Service Centres SA (Pty) Ltd under the Commission’s Corporate Leniency Policy (CLP). In that application, Macsteel alleged that it had been involved with Trident Steel (Pty) Ltd in an agreement or concerted practice to fix prices and trading conditions, contrary to section 4(1)(b)(i) and section 4(1)(b)(ii) of the Competition Act 89 of 1998, in respect of steel products manufactured by Highveld and destined for export into the AOM.

On the basis of the information submitted, the Commissioner initiated an investigation against Macsteel and Trident in January 2010, and Macsteel was granted conditional immunity on 23 February 2010.

Following completion of its investigation, the Commission’s findings (as recorded in the agreement) included that Highveld manufactured a range of steel products (including beams, columns, heavy angles, channels, joists, and coil plate) for domestic and export markets, and that during the period July 2002 to April 2008 both Macsteel and Trident acted as distributors of Highveld’s steel products sold into the AOM.

The Commission recorded that Macsteel and Trident agreed to sell Highveld-manufactured steel products into the AOM at a set price, which constituted price fixing in contravention of section 4(1)(b)(i) of the Act.

The Commission also recorded that Macsteel and Trident participated in a stock replacement scheme offered by Highveld. Under the scheme, Macsteel and Trident could export to the AOM and receive replacement stock at favourable prices upon providing proof of export. A practical difficulty arose where resellers, who had acquired stock on the understanding that it would be exported, instead on-sold the products into the domestic market, leaving Macsteel and Trident unable to provide proof of export and thereby losing the benefit of the replacement scheme. In response, the Commission recorded that Macsteel and Trident agreed on a premium to charge domestic resellers and wholesalers who on-sold Highveld-manufactured steel products, and that this agreement constituted price fixing in contravention of section 4(1)(b)(i) of the Act.

In the agreement placed before the Tribunal, Trident admitted liability for engaging in price fixing in contravention of section 4(1)(b)(i) as set out in the Commission’s findings. Trident also recorded cooperation with the Commission during the investigation and undertook to refrain from future contraventions of the same kind.

The agreement further recorded that, pursuant to a prior consent order dated 6 April 2011, Aveng had committed to a group-wide compliance programme, implemented throughout the Aveng group (including Trident), following the Tribunal’s hearing in Aveng (Africa) Limited trading as Steeledale under Tribunal Case Number 84/CR/Dec10. Trident undertook to continue with that programme.

3. Legal Issues

The central legal question before the Tribunal was whether the Tribunal should confirm the agreement between the Commission and Trident as a consent order in terms of section 58(1)(b) read with section 49D of the Competition Act 89 of 1998.

A further issue, reflected in the Tribunal’s order, concerned the payment term for the agreed administrative penalty, namely that the parties had agreed that the penalty must be paid within a specified period from the date of the Tribunal’s order.

The issues were primarily concerned with the application of statutory provisions governing consent orders and administrative penalties to the agreed facts and admissions recorded in the settlement, rather than the resolution of factual disputes on evidence. The agreement itself recorded admissions and findings, and the Tribunal’s role in the proceedings (as reflected in the order) was directed to confirmation of the settlement and the making of an appropriate order.

4. Court’s Reasoning

The Tribunal’s order reflects that it accepted the parties’ request that the settlement agreement be made an order of the Tribunal. The Tribunal confirmed the agreement “as agreed to and proposed” by the Commission and Trident, and annexed it to the order (marked “A”), indicating that the Tribunal treated the agreement as the substantive source of the terms to be made binding.

The Tribunal’s order further reflects an agreed proviso between the parties regarding the time for payment of the administrative penalty contemplated in the agreement. The Tribunal recorded that the Commission and Trident had agreed that the administrative penalty referred to in paragraph 6.1 of the agreement must be paid within three months of the date of the Tribunal’s order, and the Tribunal made that proviso part of the order.

No further reasoning on the merits of the prohibited practice allegations was set out in the Tribunal’s order itself. The confirmed agreement, however, contained the parties’ recorded position that Trident admitted contravention of section 4(1)(b)(i) and agreed to the imposition of an administrative penalty in terms of sections 58 and 59 of the Act, together with undertakings relating to future compliance.

5. Outcome and Relief

The Tribunal confirmed the settlement agreement between the Competition Commission and Trident Steel (Pty) Ltd as a consent order, subject to a proviso regarding payment timing.

The Tribunal ordered that the administrative penalty referred to in paragraph 6.1 of the agreement must be paid to the Commission within three months of the date of the order.

The Tribunal’s order, as issued, did not record any separate order as to costs.

Cases Cited

Competition Commission v Trident Steel (Pty) Ltd (114/CR/Dec12) [2012] ZACT 104; [2013] 1 CPLR 112 (CT)

Aveng (Africa) Limited trading as Steeledale (Competition Tribunal Case Number 84/CR/Dec10)

Legislation Cited

Competition Act 89 of 1998 (as amended), sections 4(1)(b)(i), 4(1)(b)(ii), 19, 22, 26, 49D, 58(1)(b), 58(1)(a)(iii), 59(1)(a), 59(2), 59(3), 59(4)

Rules of Court Cited

No rules of court were cited in the text of the judgment and consent order as provided.

Held

The Competition Tribunal confirmed, as a consent order, the agreement concluded between the Competition Commission and Trident Steel (Pty) Ltd in terms of section 49D read with section 58(1)(b) of the Competition Act 89 of 1998. The Tribunal further recorded and ordered, as an express proviso, that the administrative penalty provided for in the agreement must be paid to the Commission within three months of the date of the Tribunal’s order.

LEGAL PRINCIPLES

A consent agreement concluded between the Competition Commission and a respondent in relation to alleged prohibited practices may be made binding by being confirmed as an order of the Competition Tribunal in terms of section 58(1)(b) read with section 49D of the Competition Act 89 of 1998.

Conduct constituting price fixing falls within the scope of prohibited practices contemplated in section 4(1)(b)(i) of the Competition Act 89 of 1998, and a respondent may admit contravention and agree to an administrative penalty in terms of sections 58 and 59 of the Act.

An administrative penalty agreed in a consent order may be subject to an enforceable payment timeframe, and the Tribunal may incorporate the agreed payment term into its order when confirming the settlement.