About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Competition Tribunal
SAFLII
>>
Databases
>>
South Africa: Competition Tribunal
>>
2013
>>
[2013] ZACT 20
|
|
Competition Commission v Egoli Gas (Pty) Ltd (2009Jan4212) [2013] ZACT 20; [2013] 1 CPLR 73 (CT) (28 March 2013)
COMPETITION
TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 016402
In the matter between:
The Competition
Commission
.......................................................................................................
Applicant
and
Egoli Gas (Pty) Ltd
...................................................................................................................
Respondent
Panel: N Manoim
(Presiding Member),
M Mokuena (Tribunal
Member) and
M Holden (Tribunal
Member)
Heard on: 27 March 2013
Decided on: 28 March 2013
Order
The
Tribunal hereby confirms the order as agreed to and proposed by the
Competition Commission and the respondent annexed hereto
marked “A”
including the amended version of the agreement annexed hereto marked
“B”.
Presiding Member
N Manoim
Concurring: M Mokuena and
M Holden
BEFORE
THE COMPETITION TRIBUNAL OF SOUTH AFRICA
CT CASE NO:
CC CASE NO; 2009Jan4212
In
the matter between:
THE
COMPETITION COMMISSION
............................................................................................
Applicant
and
EGOLI
GAS (PTY) LTD
............................................................................................................
Respondent
CONSENT-
AGREEMENT BETWEEN THE COMPETITION COMMISSION AND EGOLI GAS (PTY) LTD
IN RESPECT OF CONTRAVENTION OF SECTION 4(1)(b)(ii)
OF THE
COMPETITION ACT NO. 89 OF 19SS, AS AMENDED
The
Competition Commission and Egoli Gas (Pty) Ltd hereby agree that
application be made to the Competition Tribunal for confirmation
of
this Consent Agreement as an Order of the Tribunal In terms of
sections 49D as read with sections 58(1}(a)(iii) and 58(1 )(b)
of
the
Competition Act No.89 of 1998
, as amended, on the terms set out
below:
1.
Definitions
In this Consent
Agreement, unless the context indicates otherwise:
1.1."
Act"
means
the
Competition Act No. 89 of 1998
, as amended;
1.2.
"
CLP
"
means
the Corporate Leniency Policy issued by the
Commission
in
terms of the
Act
to
clarify the
Commission's
policy
approach on matters failing within its jurisdiction in terms of the
Act,
1.3.
“
Commission*
means
the Competition Commission of South Africa, a statutory body
established In terms of
section 19
of the Act as a juristic person,
with its principal place of business at Building C, Mufayo Building,
DTI Campus, 77 Meintjses
Street Sunnyside, Pretoria* South Africa;
1.4.
“
Commissioned
means
the Commissioner of the
Commission
appointed
In terms of
section 22
of the Act;
1.5.
“
Complaint
means
the complaint initiated on 22 December 2008 by the
Commissioner
in terms
of
section 49B(1)
of the
Act
under
case number 2009Jan4212 against,
inter
alia, Egoli Gas
and
Sdsol
Gas;
1.6.
“
Consent
Agreement
means
this consent agreement duly signed and concluded between the
Commission
and
Egoli
Gas;
1.7.
"Distribution*
means
the distribution of bulk gas supplies and the transportation thereof
by pipelines with a general operating pressure of more
than 2 bar
gauge and less than 15 bar gauge or by pipelines with such other
operating pressure as the gas operator may permit
according to
criteria prescribed by regulation to points of ultimate consumption
and reticulation systems, and any other activity
incidental thereto;
1.8.
"Gas Bill"
means
the Gas Bill of 2001 which was subsequently enacted and promulgated
into law as the
Gas
Act;
1.9.
“Gas
Act
means
the
Gas Act No, 48 of 2001
, as amended;
1.10.
“Gas
Licence
By-Laws
11
means
the Gas Licence By-Laws contained in in Notice No. 3326 of 2000,
published in the Provincial Gazette No, 57, dated 31 May
2000;
1.11.
“
Gas
Regulator
means
the National Gas Regulator established by
section 3
of the
Gas Act;
1.12
“
GJTMC
"
means
the Greater Johannesburg Transitional Metropolitan Council, the
predecessor to the Greater Johannesburg Metropolitan Council;
1.13.
"Mozambique
Agreement
means
the Mozambique Gas Pipeline Agreement concluded on 26 September 2001
between the Minister of Minerals and Energy Affairs
and the Minister
of Trade and Industry and
Sasol
concerning
the construction of a gas transmission pipeline which would enable
Sasol to transport natural gas from ftie Panda and
Tamane gas fields
in Mozambique into South Africa;
1.14.
"
NERSA
"
means
the National Energy Regulator of South Africa, a regulatory
authority established in terms of the
National Energy Regulator Act
No. 40 of 2004
, as amended, with the mandate to undertake functions
of,
inter
alia,
the
Gas
Regulator
as
set
out in the
Gas Act;
1.15.
“
Sasol
Gas"
refers
to Sasol Gas Limited, a company duly incorporated and registered in
accordance with the laws of the Republic of South Africa,
with its
registered office alternatively principal place of business at 272
Kent Avenue, Femdafe, Johannesburg, South Africa.
Sasol
Gas
is
a subsidiary of
Sasol;
1.16.
"
Sasol"
means
Sasol Limited, a company duly incorporated and registered in
accordance with the laws of the Republic of South Africa, with
its
registered office alternatively principal place of business at 22
Kent Avenue, Femdale, Johannesburg, South Africa.
1.17.
“
Supply
Area*
means the geographic area depicted on the map contained in Annexure
D to the Gas Supply Agreement dated 14 August 2000 concluded
between
Egoli
Gas
and
Sasol
Gas
.
The
Supply
Area
conforms
to the municipal boundaries of the
GJTMC;
1.18.
“
Suite
of agreements”
refers
collectively to agreements entered into between
Egoli
Gas
and
Sasol
Gas
set
out in clause 4 of this
Consent
Agreement,
1.19.
“
Piped
gas"
means
alt hydrocarbon gases transported by pipeline, including natural
gas, artificial gas, hydrogen rich gas, methane rich gas.
synthetic
gas, coal bed methane gas, liquefied natural gas. compressed natural
gas, re-gasified liquefied natural gas, liquefied
petroleum
gas
or
any
combination thereof;
1.20.
“
Reticulation”
means
the division of bulk gas supplies and the transportation of bulk gas
by pipelines with a general operating pressure of no
more than 2 bar
gauge to points of ultimate consumption, and any other activity
incidental thereto;
1.21.
"Trading"
means
the purchase and sale of gas as a commodity by any person and any
services associated therewith, excluding the construction
and
operation of transmission, storage and distribution systems;
1.22.
“
Transmission*
means
the bulk transportation of gas by pipelines supplied between a
source of supply and a distributor, reticulator, storage
company or
eligible customer, or any other activity Incidental thereto; and
1.23.
“
Tribunat
means
the Competition Tribunal of South Africa, a statutory body
established in terms of
section 26
of the Act as a Tribunal of
record, with its principal place of business at Building C, Mulayo
Building, DTI Campus,
77
Melntjies
Street Sunnyskte, Pretoria.
2. Background
The Piped Gas
Regulatory Landscape
2.1.
In South Africa, the piped gas market operated without any national
regulatory framework until the
Mozambique
Agr&&mentwas
concluded.
The
Mozambique
Agreement
was
concluded In 2001 prior to the enactment of the
Gas
Act,
but
at a stage when the
Gas
Bill
had
already been published in the Government Gazette for public comment.
To this end, the preamble to the
Mozambique
Agreement
recorded
that in the , absence of specific gas legislation,
Saso!
has
requested a dispensation from envisaged future legislation that will
be binding on the future
Gas
Regulator,
and,
that such gas projects involve significant investment and risks and
the government of the Republic of South Africa and the
Government of
Mozambique and
Sasol
will be
required to provide guarantees and undertakings in order to enable
the project.
2.2.
From 1
November 2005, the main and primary piece of legislation regulating
the piped gas market in South Africa is the
Gas
Act
The
Gas Act was
assented to on 12 February 2002 and its date of
commencement was 1 November 2005.
Section 36
of the
Gas
Act
accords
the
Mozambique
Agreement
statutory
recognition.
Section 36(2)
of the
Gas
Act
states
that the
Mozambique
Agreement
binds
the
Gas
Regulator
until
10 years after natural gas is first received from Mozambique. This
period expires in 2014.
2.3.The
Gas
Act
distinguishes
between
transmission,
distribution, reticulation
and
trading
in
piped
gas
with
reference to the general operating pressure of a pipeline to points
of ultimate consumption. The general operating pressure
of pipelines
used for gas
reticulation
is no
more than 2 bar gauge; the general operating pressure for gas
distribution
is more
than 2 bar gauge but less than 15 bar gauge; and the general
operating pressure for gas transmission is above 15 bar gauge
Pressure
stations are used to control the operating pressure of a gas
pipeline. End customers can be supplied with equipment at
a cost
that can be used to reduce gas supplied at above 2 bar gauge to
below 2 bar gauge and vice versa,
2.4.
Presently, there is a bifurcated regulatory system for piped gas
m
South
Africa - gas
reticulation
falls
under the jurisdiction of municipalities whilst gas
distribution
and
transmission
fail
under the jurisdiction of
NERSA.
Municipalities
regulate gas
reticulation
in terms
of municipal By-Laws. However, both gas
reticulation
and
distribution
involves
the same economic activity - the supply of piped gas to end user
consumers. The difference between gas
reticulation
and
distribution
lie in
the operating pressure at which piped gas Is supplied to end user
consumers.
2.5.
in the period between 2000 and 2004, at the time when the
suite
of agreements
forming
the subject-matter of this
Consent
Agreement
were
concluded between
Egoli
Gas
and
Sasol
Gas,
the
Gas
Act
had
not yet come into operation and there was no legislative restriction
on the operating pressure for gas
reticulation.
Background to the
suite of agreements between Sasol Gas and Egoli Gas
2.6.
On 18 August 2000,
the
GJTMC,
following
a bidding process aimed at privatising Metro Gas - its gas
distribution and supply business- sold the business and assets
of
Metro Gas as a going concern to a consortium comprising Cinergy
Limited, a global energy company, and other entities. The
name Metro
Gas was changed to
Egoli
Gas,
Cinergy
Limited later disposed its stake in Egoli Gas. Historically,
Sasol
Gas
supplied
gas to Metro Gas.
2.7.
Simultaneous with the sale and privatisation of Metro Gas, on 18
August 2000, the
GJTMC
granted
a licence to
Egoli
Gas
to,
inter
alia,
engage
in the supply of piped gas to consumers in the municipal boundary of
the
GJTMC
in terms
of the
Gas
Licence By-Laws
.
Prior to this licence Metro Gas was limited to boundaries of the Old
Johannesburg municipality which excluded
inter
alia,
Roodepoort,
Randburg and Santon. These boundaries were enlarged in terms of the
GJTMC
licence
granted to
Egoli
Gas.
The
licence is valid for an initial period of thirty (30) years. The
licence gave
Egofi
Gas
the
right to engage in the supply of gas to consumers in the municipal
boundary of the
GJTMC
on an
exclusive basis for a period of twenty (20) years. The licence
granted to
Egoli
Gas
by
the
GJTMC
did not
contain any restriction on the operating pressure of the pipeline to
points of ultimate consumption because at the time
of the granting
of the licence the
Gas
Act
had
not yet come into operation.
2.8.
At the time of the granting of the licence,
Sasof
Gas
had
pre-existing customers in the municipal boundary of the
GJTMC
to whom
it was already supplying gas. To this end, the
Gas
Licence By-Laws
contained
a “preservation of rights" dispensation due to the change
in licensed municipal boundaries of
Egofi
Gas
which allowed
Sasoi
Gas
to
continue to supply gas to its pre-existing customers in the
municipal boundary of the
GJTMC.
2.9.
Following the acquisition of the business and assets of Metro Gas,
Egoli
Gas
entered
into a
suite
of agreements
with
Sasol
Gas. Sasol Gas
is
the sole supplier of natural gas in Gauteng with rights to import
natural gas info South Africa from Mozambique, The
suite
of agreements
formed
the subject-matter of the
Commission's
investigation
and findings in the
complaint
2.10.
According
to
Egoli
Gas, the
suite
of agreements
between
Egoli
Gas
and
Sasof
Gas
came
into existence against the following backdrop;
2.10.1. legally
uncertainty and flux in the regulatory framework for piped gas
obtaining at the time of conclusion of the suite
of agreements;
2.10.2.
Sasol
Gas
and
Egoli
Gas
are
In both in a horizontal and vertical relationship;
2.10.3.
the exclusive licence granted by the
GJTMC
to
Egoli
Gas; and
2.10.4.
changes in the municipal boundaries of the
GJTMC,
2.11.
On 27 October 2008,
NERSA
granted
Sasol
Gas
twenty
nine (29} licences for the operation of gas
distribution
facilities,
as well as twenty nine (29) licences for the
trading
in gas
in various areas of the Gauteng, Free State and Mpumalanga provinces
in terms of the Gas
Act.
Certain
of the areas in respect of which
Sasol
Gas
was
granted
distribution
and
trading
licences
by
NERSA
are
located within the area of the exclusive licence granted to
Egoli
Gas
by
the
GJTMC,
These
areas include Longdale, Technlkon and RobertviHe,
2.12.
NERSA
granted
the above-mentioned licences to
Sasol
Gas
notwithstanding
objections from
Egoii
Gas
that
the granting of
distribution!
trading
rights
to
Sasol
Gas
in
the above-mentioned areas will be In conflict with
Egoii
Gas'
existing
rights in terms of the
Gas
Licence By-Laws.
In
its reasons for decision granting aforementioned licences,
NERSA
expressly
recorded that the commercial agreement
{the
suite of agreements),
precluding
competition between
Sasol
Gas
and
Egoii
Gas,
may
be in conflict with existing competition legislation.
3. Complaint
investigation and findings
3.1.
On 19 December 2008, the
Commission
received
an application for corporate leniency in terms of the
CLP
from
Sasol
Gas
for
contravention of
section 4(1
)(b)(tl) of the
Act
arising
from its participation in tfte conclusion and implementation of
a
suite of agreements
with
Egofi
Gas.
On
22 December 2008, following
Sasof
Gas
1
application
for corporate leniency, the
Commissioner,
acting
in terms of
section 49B(1)
of the
Act,
initiated
a complaint against,
inter
alia, Egoli Gas
and
Sasol
Gas
for
contravention of
section 4(1){b)(I0
of the Act.
3.2.
The
Commission
duly
investigated the
complaint
and
after
concluding its investigation found that
Egoli
Gas and
Sasol
Gas have
concluded and implemented a
suite
of agreements
containing
customer and territorial restraints which contravene
section
4(1)(b)(ii)
of the Act.
4. The suite of
agreements
4.1.
The
suite
of agreements
concluded
between
Egoli
Gas
and
Sasol
Gas
containing customer and territorial restraints are the following:
4.1.1.the Gas Supply
Agreement dated 14 August 2000;
4.1.2.
Agreement concluded in 2002 in respect of Universal Fibres and HC
Heat Exchanges;
4.1.3.
Letter agreement dated 1 October 2003 in respect of Profal (2
nd
Factory);
4.1.4. Amendment to the
Gas Supply Agreement dated 29 March 2004;
4.1.5. Agreement
concluded on 19 April 2004 In respect of Corobrick; and
4.1.6.
Customer allocation arrangements in respect of Venter Trailers;
Almar Packaging, Boart Longyear and Armcoil Africa.
4.2.
In terms of the
suite
of agreements
referred
to above —
4.2.1.
A designated class of customers referred to as “the
Purchaser's Customer’s” (defined as any person occupying
property or land located within the
Supply
Area)
and
a geographic area termed the
Supply
Area
(depicted
on the map contained in Annexure D to the Gas Supply Agreement dated
14 August 2000) were allocated to
Egoli
Gas;
4.2.2.
Egoli Gas
was
restrained from supplying gas purchased from
Sasol
Gas
to
any other customer other than the designated dass of customers
allocated to it;
4.2.3.
Egoli Gas
was
restrained from supplying piped gas supplied to it by
Sasol
Gas
to
any of its allocated customers who, to the knowledge of
Egoli
Gas,
on
sold such gas for consumption outside the allocated
Supply
Area
;
4.2.4.
Sasol Gas
and
its affiliates were restrained from supplying gas or entering into
an agreement to supply gas to any of
Egoli
Gas'
allocated
customers within the
Supply
Ansa;
4.2.5.
Sasol Gas
and its
affiliates were restrained from constructing* owning, operating or
entering into any agreement to construct, own or operate
any gas
pipeline, or any related plant and equipment by means of which any
of
Egoli
Gas'
allocated
customers (as defined) purchased gas from
Sasol
Gas In
contravention of the agreement;
4.2.6.
Egoli Gas
and
Sasol
Gas
agreed
to two exceptions to the restraints preventing
Sasol
Gas
from
supplying
piped
gas
to
the designated class of customers allocated to
Egoli
Gas
within
the
Supply
Area;
4.2.6.
The first exception allocated to
Sasol
Gas
sixteen
(16) “Purchaser’s Customers” located within the
Supply Area and which are listed in Schedule 1 to the
Amendment to
Gas Supply Agreement dated 29 March 2004. These sixteen customers
were pre-existing customers of
Sasol
Gas
at
the time the Gas Supply Agreement dated 14 August 2000 was
concluded; and
4.2.7.
The second exception allowed
Sasol
Gas,
by
agreement between the parties on a project by project basis, to
supply piped gas to certain of the customers allocated to
Egoli
Gas
in
terms of the Gas Supply Agreement dated 14 August 2000 fthe
Purchaser’s Customers") located within the
Supply
Area
If
Egoli
Gas
decides
not to supply such customers.
4.2.7.
On an
ad
hoc basis, Egofi Gas
and
Sasol
Gas
agreed
to allocate specific customers with the
Supply
Area.
4.3.
The
Commission's
investigation
is predicated on two main findings:
4.3.1.
Firstly, the piped gas regulatory framework including the Gas
Licence
By-Laws
do
not prevent
Egoli
Gas
from
supplying piped gas outside of the
Supply
Area
in
competition with
Sasol
Gas
x
subject
to
Egoli
Gas
obtaining
the necessary regulatory approval; and
4.3.2.
Secondly, the piped gas regulatory framework including the
Gas
Licence By-Laws
do
not sanction market allocation in contravention of
section
4(1)(b){ii)
of the
Act.
The
licence granted by the
GJMTC
to
Egoli
Gas
is
a
reticulation
licence.
The piped gas regulatory framework does not preclude competition
between a gas
reiiculator
and
a gas
distributor.
End user
customers can switch between the services provided by a gas
reticuiatorand
the
services provided by a gas
distributor
provided
that the equipment referred to in 2.3 above is installed. The
customer and territorial restraints between
Egoii
Gas
and
Sasol
Gas
prevent such switching from taking place.
5.
Admission
Egoli
Gas
admits
that It has entered into a
suite
of agreements
with
Sasol
Gas,
against the backdrop of
the exclusive reticulation licence granted to it by the
GJTMC,
which
resulted in a contravention of
section 4(1)(b)(il)
of the
Act
6.
Agreement concerning future conduct
6.1.
Egoii
Gas
confirms
that the previous supply agreement dated 14 August 2000 concluded
between
Egoli
Gas
and
Sasol
Gas
has
been cancelled and that a new supply agreement is being negotiated.
To this end,
Egoli
Gas
agrees
and undertakes to provide the
Commission
with a
copy of;
6.1.1. the new supply
agreement within thirty (30) days of the date of conclusion of the
agreement; and
6.1.2.
any subsequent amendment to the new supply agreement within thirty
(30) days of the date of conclusion of such amendment
6.2.
In addition,
Egofi
Gas
agrees
and undertakes:
6.2.1.
to prepare and circulate a statement summarising the content of this
Consent
Agreement
to
Us directors and shareholders within 30 days of the date of
confirmation of this
Consent
Agreement
as
an order of the
Tribunal:
6.2.2.
refrain from engaging in market allocation In contravention of
sections 4(1)(b)(ii)
of the Act; and
6.2.3.
develop and implement a compliance programme designed to ensure that
its employees, management and directors do not engage
in any conduct
which constitutes a prohibited practice in terms of the
Act,
a copy
of which programme shall be submitted to the
Commission
within
60 days of the date of confirmation of this
Consent
Agreement
as
an order of the
Tribunal.
7.
Administrative Penalty
7.1.
Egoli
Gqs
is
liable for an administrative penalty in terms of
sections
58{1)(a)(in)
,
59
(2) and (3) of the Act in the amount of R1, 627
910.76. The administrative penalty represents
WMM
of
Egofi
Gas’
annual
turnover for business customers lor the financial year ended 31
December 2008.
7.2.
Egoli Gas
will pay
the administrative penalty to the
Commission
within
thirty (30) after the date of confirmation of this
Consent
Agreement
as
an Order of the
Tribunal.
7.3.
Egoli Gas
shall
remit payment of the administrative penalty into the following bank
account:
Name of Account
Holder: COMPETITION COMMISSION
Bank
Name: ABSA BANK PRETORIA
Account
number
:
4050778576
Branch code: 323345
7.4.
The penalty will be paid over by the
Commission
to the
National Revenue Fund in accordance with the provisions of
section
59(4)
of the
Act.
8. Full and final
settlement
This
Consent
Agreement
t
upon
confirmation thereof as an Order of the
Tribunal,
concludes
all proceedings between the
Commission
and
Egoli
Gas
in
relation to the contravention of
section 4(1)(b)(ii)
of the Act,
investigated under the
Commission’s
case
number: 2009Jan 4212.
DATED
at
Sandton
on this
the 19th day o
f
March 2013
Duly
authorised signatory of Egoli Gas (Pty) Ltd
DATED
at
Pretoria
on this
the 20th day o
f
March 2013
Shan Ramburuth
Commissioner,
Competition Commission
BEFORE
THE COMPETITION TRIBUNAL OF SOUTH AFRICA
CT CASE NO: 016402
CC
CASE NO: 2009Jan4212
In
the
matter between:
THE COMPETITION
COMMISSION
and
EGOLl
GAS (PTY) LTD
ADDENDUM
TO THE CONSENT AGREEMENT
BETWEEN
THE
COMPETITION COMMISSION AND EGOLS GAS (PTY)
LTD
IN RESPECT
OF
CONTRAVENTION OF
SECTION 4(1)(b)(ii)
OF
THE
COMPETITION
ACT NO 89 OF
1998
The
consent agreement between Competition Commission and Egoli Gas (Pty)
Ltd
dated
20 March 2013 (“the consent
agreement”)
is
hereby
amended as follows:
Insertion of
sub-paragraphs 6.2.4 and 6.2.5 In the consent agreement
1.
Sub-paragraphs 6.2.4
and
6
.2.5
are
hereby inserted
in
the
consent agreement
2. The Inserted
sub-paragraphs 6.2.4. and 6.2.5 shall read as follows:
"6.2.4.
Egoli Gas
agrees
and undertakes to
give
notification
to
its
existing business
customers and
other
potential business
customers
of
piped gas, including to the extend possible to the 16 Sasol Gas
customers
as per paragraph 4.2.8 of the Consent Agreement, informing such
customers that they are free to make use of any gas
supplier of
piped gas should they wish to do so; and
6.2.5. The notification
in 6.2.4. shall:
6.2.5.1.
be made by Egoli Gas within 30 (thirty) days after the date of
confirmation of the consent agreement as an order of the
Tribunal;
6.2.5.2. take the form
of letters and a public notice; and
6.2.5.3.
a copy of the notification will be provided to the Commission as
well as a list of specific firms that will receive the
notification.
DATED at Johannesburg on
this 28th day of March 2013
Duly
authorised signatory of Egoli Gas (Pty) Ltd
DATED
at
Pretoria
on this
the 28th day o
f
March 2013
Shan Ramburuth
Commissioner,
Competition Commission