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[2013] ZACT 25
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Competition Commission v Spring Lights Gas (Pty) Ltd (11569) [2013] ZACT 25 (11 April 2013)

COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case
No: 011569
In
the matter between:
The
Competition Commission
..............................................................................
Applicant
And
Spring
Lights Gas (Pty) Ltd
..............................................................................
Respondent
Panel: N Manoim
(Presiding Member)
Y
Carrim (Tribunal Member)
A Wessels (Tribunal
Member)
Heard on: 07 August
2012
Final
submission received on: 05 April 2013
Decided on: 11 April
2013
Order
The Tribunal hereby
confirms the following attached consent agreements, as agreed to and
proposed by the Competition Commission
and the Respondent:
1. The main
agreement, dated 20 August 2010;
2. The addendum
thereto, dated 30 July 2012; and
3. The second
addendum thereto, dated 03 April 2013, including the confidential
annexures attached thereto.
Presiding
Member
N Manoim
Concurring: Y Carrim
and A Wessels
BEFORE
THE COMPETITION TRIBUNAL OF SOUTH AFRICA
CT CASE NO:
CC CASE NO:
In the matter
between:
THE
COMPETITION COMMISSION
............................................................................................
Applicant
and
SPRING
LIGHTS GAS (PTY) LTD
.........................................................................................
Respondent
CONSENT AGREEMENT
BETWEEN THE COMPETITION COMMISSION AND SPRING LIGHTS GAS {PTY) LTD
IN RESPECT OF CONTRAVENTIONS OF
SECTION 4(1)
(b) OF THE
COMPETITION
ACT NO 89 OF 1998
The Competition
Commission and Spring Lights 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.
“
the Act
means the
Competition Act No. 89 of 1998
, as amended;
1.2.
“
The Administration Services
Agreement
means
the Agreement between
Sasol Gas
and Spring Lights as described in clause 2.3 of this Consent
Agreement.
1.3.
BEE*
means Black Economic Empowerment;
1.4.
"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;
1.5.
"CEPR'
refers to Coal, Energy and Power Resources Limited, a broad based
economic empowerment consortium 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 101 Stanley Copley Drive, Asherville, Durban,
KwaZulu-Natal;
1.6.
"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, Mulayo Building,
DTI Campus, 77 Meintjies
Street, Sunnyside, Pretoria, South Africa;
1.7.
"Commissioned
means the Commissioner of the Competition Commission appointed in
terms of section
22
of the Act;
1.8.
"Compiaint
means the complaint initiated by the Commissioner in terms of .
section 49
B of the Act under case number 2009Jan4212;
1.9.
"Consent Agreement"
means this consent agreement duly signed and concluded between the
Commission and Spring Lights;
1.10.
"Customer contracts'’
means customer contracts purchased by Spring Lights from Sasol Gas;
1.11.
"Designated Geographical Area
"
means the territory demarcated in the suite of agreements to be the
region to which Spring Lights would be confined, for
the purpose of
conducting the business rights acquired from Sasol Gas, Initially
this area was diagrammatically demarcated as
a portion of the Durban
South territory. It was later expanded to include the whole of the
KwaZulu-Natal province.
1.12.
“Gas
BilF
means the Gas Bill of 2001 which was subsequently enacted and
promulgated into law as the Gas Act;
1.13.
“Gas
Acf
means the
Gas Act No. 48 of 2001
, as amended;
1.14.
"Gas
Regulator
means the National Gas
Regulator established by
section 3
of the
Gas Act;
1.1.5.
"
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;
1.16.
Piped
gas" means natural gas consisting mainly of methane
transmitted, distributed and reticulated through pipelines and is

used as an energy source in industrial and urban areas;
1.17.
"Sasol
refers to 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, Ferndale, Johannesburg, South Africa.
1.18.
"
Sasol
Gas” refers to Sasol Gas Limited, a wholly owned subsidiary of
Sasol Gas Holdings 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,
Ferndale, Johannesburg, South Africa;
1.19.
"Sasol
Gas Holdings”
refers to Sasol Gas Holdings (Pty) Ltd, 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, Ferndale, Johannesburg,
South Africa
1.20.
"Spring Lights"
refers to Spring Lights Gas (Pty) Ltd, 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 BKS House, 2 Maryvale Road, Wesfvilie,
KwaZulu-Natal,
South Africa;
1.21.
“
Suite of agreements*
refers collectively to agreements entered into between Sasol Gas and
Spring Lights set out in clause 4 of this Consent Agreement;
and
1.22.
“
Tribunal
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 Meintjies
Street, Sunnyside, Pretoria.
2. Background
2.1. Spring Lights
was previously known as Spring Lights 40 (Pty) Ltd. Sasol Gas
Holdings holds 49% of the issued share capital
of Spring Lights. The
remaining 51% of the issued shares in Spring Lights is held by CEPR.
Sasol facilitated the creation of
CEPR as an entity whose
shareholding was broad based and in keeping with principles
underpinning the advancement of Sasol's BEE
ideals. Sasol, together
with CEPR, formed Spring Lights in 2002, for the specific purpose of
Spring Lights’ acquisition
of a portion of the business of
Sasol Gas. Consequently CEPR could, as a majority shareholder in
Spring Lights, participate in
that part of the business of Sasol Gas
which Spring Lights acquired. The aforesaid acquisition formed part
of SasoJ's BEE strategy,
as implemented at that time.
2.2. As a result of
this acquisition by Spring Lights of a portion of the business of
Sasol Gas, a suite of agreements was concluded.
The suite of
agreements were directed towards the purchase and sale of a portion
of the Sasol Gas business acquired by Spring
tights; the supply of
gas by Sasol Gas to Spring Lights; the terms and conditions upon
which such gas would be supplied; the
regulation of the relationship
between Sasol Gas Holdings and CEPR as shareholders in Spring
Lights; and the widening of the
ambit of the business that Spring
Lights initially acquired in terms of the sale of business
agreement. The suite of agreements
resulted in the market allocation
arrangements forming the subject-matter of this Consent Agreement.
2.3. In addition,
Sasol Gas and Spring Lights concluded the Administration Services
Agreement, in terms of which Sasol Gas agreed
to provide
administrative support to Spring Lights, including making available
certain published international and local energy
price indices (such
as crude oil, coal, electricity and other oil derivative prices) and
economic data (such as GDP and inflation
related data). These
indices were not produced by Sasol, and were (and are still)
obtainable independent of Sasol (although for
a cost). Sasol Gas
also agreed to assist Spring Lights to implement the price
adjustments according to the price escalation mechanisms
contained
in the agreements between Spring Lights and its customers.
2.4. The
Administration Services Agreement was used as a basis for the price
adjustment administration assistance provided by
Sasol Gas which
arrangement is considered by the Commission to constitute a
contravention of
section 4(1){b)(i)
, which Spring Lights does not
dispute.
3. Complaint
investigation and findings
3.1. The Commission
Initiated the complaint based on information received from a
leniency application submitted in terms of the
Commission’s
CLP on 30 October 2008 by Sasol on behalf of its subsidiary, Sasol
Gas. The CLP applicant submitted information
and supporting
documentation which indicated that Sasol Gas and Spring Lights
entered into a suite of agreements which contravened
sections
4(1)(b)(f)
and (ii) of the Act.
3.2. Prior to
submitting the application for leniency, Sasol had made an
application for a Marker in terms of Commission’s
CLP which
was granted on 7 October 2008. The Commission initiated the
complaint on 22 December 2008. In conducting its investigation
of
the complaint, the Commission consulted the Gas Regulator
established in terms of the
Gas Act
>
3.3. The Commission
conducted an investigation of the complaint as a result of which it
found that Sasol Gas and Spring Lights
Gas have:
3.3.1. engaged in
conduct in terms of the Administration Services Agreement which
resulted in a contravention of
s 4{1)(b)(i)
of the Act; and
3.3.2. entered into a
suite of agreements which had the effect of dividing the piped gas
market by allocating customers and territories
in contravention of
s
4(1)(b)(ii)
of the Act
4. Market allocation
4.1. The suite of
agreements between Sasol and Spring Lights dividing the market by
allocating customers and territories are the
following:
4.1.1. the Sale and
Purchase of Business Agreement dated 1 July 2002 between Spring
Lights and Sasol Gas;
4.1.2. the
Shareholders Agreement dated 20 August 2002, between Sasol Gas
Holdings and CEPR;
4.1.3. the First Gas
Supply Agreement dated 1 July 2002, between Spring Lights and Sasol
Gas;
4.1.4. the Memorandum
of Understanding dated 16 May 2006 between CEPR and Sasol Gas
Holdings; and
4.1.5. the Second Gas
Supply Agreement dated 22 August 2007, between Spring Lights and
Sasol Gas.
4.2. In terms of the
suite of agreements referred to above —
4.2.1. The portion of
the Sasol Gas business which Spring Lights would acquire, which
would be the business of Spring Lights (which
could only change by
unanimous resolution of the shareholders), was the business of
selling gas in the Durban South region to
a specified group of
customers and potential future customers in that geographical area,
to the exclusion of certain identified
customers and certain
categories of business and any geographical area which was not
included in the sale of business,
4.2.2. Sasol Gas
would supply gas to Spring Lights to enable Spring Lights to conduct
its business, but subject to the restriction
that Spring Lights
could only buy gas from Sasol Gas and sell it to its customers
(being the customers whose customer contracts
ft acquired in terms
of the Sale and Purchase of Business Agreement) and to customers in
the Durban South area. However, Spring
Lights was restricted from
selling to any customer which, to the knowledge of Spring Lights,
on-sold the gas for consumption
inside or outside of the territory
specified in the supply agreement..
4.2.3. Through the
Shareholders' Agreement, Sasol Gas Holdings and CEPR recognised that
the business of Spring Lights would be
restricted to the business
purchased by Spring Lights in terms of the Sale and Purchase of
Business Agreement and to future customers
in the Durban South
region (which customers, read together with the first gas supply
agreement, were restricted to the pool of
customers to whom Spring
Lights could sell gas and the territory within which it could sell
gas).
4.2.4
Sasol Gas Holdings and CEPR later concluded a memorandum of
understanding to,
inter alia,
expand the potential customers to whom Spring Lights could sell gas
purchased from Saso! Gas and to expand the territory within
which
Spring Lights could sell gas purchased from Sasol Gas. Consequently,
a second gas supply agreement was concluded which
had the effect of
expanding the territory in which Spring Lights could trade, and
Spring Lights’ potential customer base,
but still contained
restrictions in that Spring Lights was limited to selling gas within
the designated geographic area and was
prohibited from selling gas
within certain categories and to certain identified customers,
4.3. The suite of
agreements referred to above was implemented by Sasol Gas, Spring
Lights and CEPR and the parties acted in accordance
with the terms
of those agreements. Consequently, Sasol Gas and Spring Lights have
entered into a suite of agreements which had
the effect of dividing
the market by allocating customers and territories of piped gas in
contravention of
s 4(l)(b)(H)
of the Act
4.4. Spring Lights
submitted a licence applications to the Gas Regulator (NERSA) in
terms of the
Gas Act on
a basis consistent with the suite of
agreements (particularly in relation to marketing areas) as set out
in the suite of agreements,
4.5. The rationale
behind these provisions was to foster BEE at the trading level of
the gas supply chain by providing Spring
Lights, as an empowered
firm, with a customer base and assisting it to acquire the necessary
expertise to develop and excel.
Sasol Gas was of the view that if it
had continued servicing this customer base, or offered to service
potential future customers
in the relevant Designated Geographical
Area, Spring Lights would not have secured a foothold in the market.
Consequently, Spring
Lights has made an application to the
Competition Commission to exempt the conduct permitted in terms of
these agreements, on
the basis that it promotes the ability of small
businesses, or firms controlled or owned by historically
disadvantaged persons,
to become competitive, in terms of
section 10
(3)(b)(ii) of the Act.
5. Price-fixing
5.1. As described
above, in terms of the Administration Services Agreement, Sasol Gas
undertook to provide administrative assistance
to Spring Lights.
Such administrative support included making available pricing
indices (consisting of independently sourced
economic and
energy-related time series data), which Spring Lights used to
periodically adjust the price that It would charge
to customers, and
assisting Spring Lights to administer the price adjustment
mechanisms contained in Spring Lights agreements
with its customers.
Sasol Gas was paid a service fee for maintaining a database of
indices, generating forecasts for budgeting
purposes, and ensuring
the price adjustment intervals were complied with.
5.2. Given that
Spring Lights was a new entrant in the gas market, it had no
expertise in the industry or any personnel with the
requisite skills
or experience. The Administration Services Agreement was thus
concluded in order for Sasol Gas to provide administrative

assistance to Spring Lights - with the intention being that, in time
and through the passing of skills, Spring Lights would become

independent and would itself undertake the work envisaged in the
Administration Services Agreement.
5.3. Pursuant to the
agreement, Sasol Gas would receive information about the identities
of the customers to whom Spring Lights
sold gas and the extent of
gas purchases by these customers from Spring Lights, and information
regarding price increases to
these customers.
5.4. Consequently,
Sasol Gas and Spring Lights entered into an agreement, which had the
effect of fixing the price of piped gas
in contravention of
s
4(1){b)(i)
of the Act.
6. Admission
6.1. Spring Lights
admits the facts set out in paragraph 4 above and admits that it has
entered into a suite of agreements which
contravened
section
4(1)(b)(ii)
of the Act in those respects.
6.2. Spring Lights
admits the facts set out in paragraph 5 above and admits that it
entered into an agreement which resulted in
a contravention of
section 4(1
)(b)(i) of the Act in those respects.
7. Agreement
concerning future conduct
7.1. Spring Lights
confirms that it has already put in place measures to prevent any
conduct which could be misconstrued as price
fixing. It has taken
the following measures in this regard:
7.1.1. Directors of
Spring Lights who were also active in Sasol Gas have resigned from
the Board of Spring Lights;
7.1.2. Sasol Gas no
longer provides any administrative support services in terms of the
Administration Services Agreement;
7.1.3. Spring Lights
has secured independent service providers to administer the pricing
databases and analyse the economic data
that drive the gas price
adjustment mechanisms; and
7.1.4. Spring Lights
has made significant investments in implementing a new Enterprise
Resource and Planning (“ERP”)
system so that it no
longer needs access to Sasol Gas’ SAP system for the purpose
of administering the business.
7.2. In addition,
Spring Lights agrees and undertakes;
7.2.1. to prepare and
circulate a statement summarising the content of this Consent
Agreement.to its directors and shareholders
within 30 days of the
date of confirmation of this Consent Agreement as an order of the
Tribunal;
7.2.2. not to enforce
any of market allocation clauses contained in the suite of
agreements or any other agreement or require
any of the parties to
the suite of agreements or any other agreement to abide by the
aforesaid clauses, unless an exemption Is
granted by the Competition
Commission;
7.2.3. to take
necessary steps to procure the amendment of the suite of agreements
or any other agreement to remove any market
allocation clauses
within 60 days of the confirmation of this consent agreement as an
order of the Tribunal unless an exemption
is granted by the
Competition Commission;
7.2.4. to, refrain
from engaging in price fixing and market allocation in contravention
of
sections 4(1
)(b)(i) and (ii) of the Act; and
7.2.5. to 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 shad be submitted
to the Commission within 60
days of the date of confirmation of this Consent Agreement as an
order of the Tribunal.
8. Administrative
Penalty
8.1. Spring Lights is
liable for an administrative penalty in terms of
sections
58(1)(a)(iii)
,
59
(2) and (3) of the Act in the amount of R 10.8
million (TEN MILLION AND EIGHT HUNDRED THOUSAND RAND). The
administrative penalty
represents 3% of Spring Lights’ annual
turnover for financial year ending 30 June 2008.
8.2. The
administrative penalty will be paid by Spring Lights to the
Commission within 60 days after the date of confirmation
of this
Consent Agreement as an order of the Tribunal. 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.
9. Full and final
settlement
This Consent
Agreement, upon confirmation thereof as a consent order by the
Tribunal, concludes all proceedings between the Commission
and
Spring Lights, in relation to the contravention of
section
4(1}(b)(i)
and (it) of the Act, investigated under the Commission’s
case number 2009Jan 4212.
DATED at DURBAN on
this the 17th day of AUGUST 2010
Duly authorized
signatory of Spring Lights (Pty) Ltd
DATED at PRETORIA on
this the 20th day AUGUST 2010
Shan Ramburuth
Commissioner,
Competition Commission
BEFORE THE
COMPETITION TRIBUNAL OF SOUTH AFRICA
CT CASE NO:
52/CR/Aug10 CC
CASE NO: 2009Jan4212
In the matter
between:
THE COMPETITION
COMMISSION Applicant
and
SPRING LIGHTS GAS
(PTY) LTD Respondent
ADDENDUM TO THE
CONSENT AGREEMENT BETWEEN THE COMPETITION COMMISSION AND SPRING
LIGHTS GAS (PTY) LTD IN RESPECT OF CONTRAVENTIONS
OF
SECTION 4(1)
(b) OF THE COMPETITION. ACT NO 89 OF 1998
The consent agreement
between Competition Commission and Spring Lights Gas (Pty) Ltd ("the
consent agreement”) is hereby
amended as follows:
1. Amendment of
paragraph 1.16
1.1.
The definition of
"piped gas*
in paragraph 1.16 of the-consent agreement is hereby amended by
substituting the definition of
*piped
gas*
in paragraph 1.16 with the
definition for
"
gas"
that appears in
section 1
of the
Gas Act No. 48 of 2001
, as amended,
1.2. The amended
paragraph 1.16 of the consent agreement shall read as follows:
"1,16.
“
piped gas?'
means all hydrocarbon gases
transported bv
pipeline.
Including natural aas. 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
;
2. Insertion of
paragraph 7.2,6
2.1. Paragraph 7.2.6,
is hereby inserted into the Consent Agreement.
2.2. The inserted
paragraph 7,2.6 of the Consent Agreement shall read as follows:
“
7.2.6. to
submit a draft of the compliance programme referred to in paragraph
7.2.5 above to NERSA
DATED at WESTVILLE on
this the 30th day of JULY 2010
Duly authorized
signatory of Spring Lights (Pty) Ltd
DATED at PRETORIA on
this the 30th day AUGUST 2010
Shan Ramburuth
Commissioner,
Competition Commission
BEFORE THE
COMPETITION TRIBUNAL OF SOUTH AFRICA
CT CASE NO:
52/CR/Aug10
CC CASE NO:
20G9Jan4212
In
the matter
between:
THE COMPETITION
COMMISSION Applicant
and
SPRING LIGHTS GAS
(PTY) LTD Respondent
SECOND ADDENDUM TO
THE CONSENT AGREEMENT BETWEEN THE COMPETITION COMMISSION AND SPRING
LIGHTS GAS (PTY) LTD IN RESPECT OF CONTRAVENTIONS
OF SECTION 4(1}
(b) OF THE COMPETITION ACT NO 89 OF 1898
The consent agreement
between Competition Commission and Spring Lights Gas (Pty) Ltd
(“consent agreement") is hereby
amended as follows:
1.
Amendment of clause 4.5
1.1. The following
sentence is Inserted at the end of clause 4.5;
"The exemption
application was refused by the Commission on 24 February 2012.“
1.2.
The amended clause 4.5 of the consent agreement will read as
follows:
“
4.5. The
rationale behind these provisions was to foster BEE at the trading
level of the gas supply chain by providing Spring
Lights, as an
empowered firm, with a customer base and assisting it to acquire the
necessary expertise to develop and excel.
Sasol Gas was of the view
that rf it had cont&iued servicing this customer base, or
offered to service potential future customers
in the relevant
Designated Geographical Area, Spring Lights would not have secured a
foothold in the market. Consequently, Spring
Lights has made an
application to the Competition Commission to exempt the conduct
permitted in terms of these agreements, on
the basis that it
promotes the ability of small businesses, or firms controlled or
owned by historically disadvantaged persons,
to become competitive,
in terms of section 10(3Xb)(ii) of the Act. The exemption
application was refused by the Commission on
24 February 2012."
2. Amend merit of
clause 7.1.2
2.1. The following
sentence Is inserted at the end of clause 7.1.2:
"Spring Lights
and Sasol Gas have signed an addendum to the Administration Services
Agreement and Sale of Business Agreement
effecting, amongst other
things, the termination of the Administration Services Agreements, A
copy of this addendum Is attached
to the Consent Agreement as
Annexure “A”;
2.2. The amended
clause 7.12 of the consent agreement will read as follows:
“
7.1.2. Sasol
Gas no longer provides any administrative support services in terms
of the Administration Services Agreement. Spring
Lights and Sasol
Gas have signed an addendum to the Administration Services Agreement
and Sale of Business Agreement effecting,
amongst other things, the
termination of the Administration Services Agreement. A copy of this
addendum is attached to the Consent
Agreement as Annexure “A";"
3. Insertion of
clause 7.1.5
3.1. Clause 7.1.5 is
inserted into the consent agreement
3.2. The Inserted
clause 7. 1.5 of the consent agreement wifi read as follows:
"7.1.5. Spring
Lights and Sasol Gas have signed addenda to th© Suite of
agreements which effect the deletion or amendment
where appropriate,
of the clauses of the Suite of Agreements identified In clause 4 of
the Consent Agreement. Copies of these
addenda are attached to the
Consent Agreement as Annexures “A", “B”, “C"
and "D"
respectively*"
4. Amendment of
clause 7,2.2
4.1. The following
words are deleted from the end of clause 7.2.2:
"unless an
exemption Is granted by the Competition Commission;" and
replaced with the words:
"which clauses
have, in any event been deleted or amended, where appropriate;"
4.2. The amended
clause 7.2.2 of the consent agreement will read as follows:
“
not to enforce
any of the market allocation clauses contained in the suite of
agreements or any other agreement or require any
of the parties to
the suite of agreements or any other agreement to abide by the
aforesaid clauses, which clauses have, In any
event, been deleted or
amended, where appropriate,*”
5.
Deletion
of clause 7.2.3
5.1.
Clause 7.2.3 is deleted in its
entirety.
DATED at WESTVILLE on
this the 28th day of MARCH 2010
Duly authorized
signatory of Spring Lights (Pty) Ltd
DATED at PRETORIA on
this the 3th day APRIL 2010
Shan Ramburuth
Commissioner,
Competition Commission