Brief Summary

Competition Law — Consent Agreement — Confirmation of consent agreement between Competition Commission and Stefanutti Stocks Holdings Ltd regarding contraventions of section 4(1)(b)(iii) of the Competition Act — Stefanutti admitting to collusive tendering practices in the construction industry — Tribunal confirming the consent agreement as an order, promoting transparency and competition in the market.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings took the form of an application to the Competition Tribunal for the confirmation of a consent agreement as an order of the Tribunal in terms of section 49D read with section 58(1)(a)(iii) and section 58(1)(b) of the Competition Act 89 of 1998 (as amended). The decision recorded is the Tribunal’s confirmation of the consent order agreed between the parties, annexed to the Tribunal’s order as “A”.

The parties were the Competition Commission (as applicant) and Stefanutti Stocks Holdings Ltd (as respondent). The panel comprised N Manoim (Presiding Member), Y Carrim, and T Madima. The matter was heard on 18 July 2013 and decided on 22 July 2013.

The procedural history reflected in the consent agreement was that the Commission had initiated complaints in February 2009 and September 2009 into alleged prohibited practices in the construction industry, and later (in February 2011) established a settlement initiative directed at fast-tracking resolution of construction bid-rigging matters. Stefanutti applied for settlement/leniency under that process on 15 April 2011, and the parties ultimately concluded a written consent agreement signed on 21 June 2013, which was then placed before the Tribunal for confirmation.

The general subject-matter of the dispute concerned alleged collusive tendering (bid-rigging) in the construction industry, characterised in the consent agreement as the exchange of cover prices, the inclusion of losers’ fees, and tender allocation arrangements. The conduct was treated as contraventions of section 4(1)(b)(iii) of the Competition Act.

2. Material Facts

The consent agreement recorded that the Commission initiated a complaint on 10 February 2009 into alleged prohibited practices relating to collusive conduct in the construction of stadiums for the 2010 FIFA Soccer World Cup, implicating a number of construction firms including Stefanutti. It also recorded that, on 1 September 2009, following immunity applications under the Commission’s Corporate Leniency Policy, the Commission initiated a further complaint into alleged contraventions of section 4(1)(b) (price fixing, market allocation, and collusive tendering) relating to a range of construction projects involving multiple named firms and joint ventures.

The consent agreement further recorded that, following these and other investigations, the Commission formed the view that there had been widespread collusion in contravention of section 4(1)(b)(iii) in the construction industry. In response, the Commission published an Invitation (1 February 2011) offering firms an opportunity to settle contraventions through the Construction Fast Track Process (CFTP), subject to requirements including truthful disclosure, cooperation, cessation of the prohibited conduct, and payment of an administrative penalty determined with reference to turnover in relevant sub-sectors.

Within that settlement framework, Stefanutti applied on 15 April 2011 and disclosed 39 prohibited practices, of which the consent agreement characterised 24 as “prescribed” (time-barred) and 15 as “non-prescribed” (not time-barred). The agreement recorded that Stefanutti was first to apply in respect of 3 of the 15 non-prescribed prohibited practices, and not first to apply in respect of the remaining 12 non-prescribed practices.

In addition to disclosed conduct, the consent agreement recorded that Stefanutti was implicated in 9 non-prescribed prohibited practices that it did not disclose, and that it agreed to settle those as well. The agreement therefore proceeded on the basis that Stefanutti would settle a total of 21 non-prescribed prohibited practices, comprising 14 in the Civil Engineering sub-sector and 7 in the General Building sub-sector.

The prohibited practices were described as collusive tendering typically involving cover pricing, sometimes coupled with losers’ fees and profit-sharing or allocation arrangements. The consent agreement described multiple project-specific arrangements, including (among others) building and civil engineering tenders such as the UCT Women’s Residence project, Bayhead Road Extension / Khangela Bridge project, Green Point Stadium project, FNB Soccer City Stadium project, and the Durban International Convention Centre project, as well as other projects (including some outside South Africa) such as projects at Tati (Botswana) and Ngezi (Zimbabwe). In those descriptions, the agreement recorded that Stefanutti either provided or received cover prices, and in certain instances agreed on and/or paid or was to receive compensation (including losers’ fees), with the effect that bids were rendered non-competitive and tender outcomes were predetermined amongst competitors.

The consent agreement contained an explicit admission by Stefanutti that it entered into the agreements detailed in the consent agreement, with competitors, in contravention of section 4(1)(b)(iii). It also recorded cooperation undertakings, including that Stefanutti had provided truthful and timely disclosure and expeditious cooperation, had confirmed it had ceased the conduct, and had not destroyed or falsified relevant information.

For prospective conduct, the agreement recorded undertakings that Stefanutti would cooperate further in subsequent proceedings, make employees/former employees available as witnesses, submit a competition law compliance programme within 60 days of confirmation, circulate a statement summarising the consent agreement to management and operational staff within 60 days, and refrain from future prohibited practices.

On penalty, the agreement recorded that Stefanutti accepted liability for an administrative penalty calculated by reference to the Commission’s Invitation methodology, restricted to non-prescribed prohibited practices. The agreed administrative penalty was R 306 892 664, with specified payment terms spread over four instalments across three years. The agreement further recorded that the fourth payment would attract 10% per annum interest on the amount of that instalment.

3. Legal Issues

The central legal question before the Tribunal, as reflected in the Tribunal’s order, was whether the Tribunal should confirm the consent agreement concluded between the Commission and Stefanutti as an order of the Tribunal under section 49D read with section 58 of the Competition Act.

The consent agreement itself framed the underlying contraventions as falling within section 4(1)(b)(iii) (collusive tendering), and addressed the legal distinction between “prescribed” and “non-prescribed” prohibited practices by reference to section 67 of the Act (with the settlement and penalty calculation confined to non-prescribed conduct). In this procedural setting, the Tribunal’s task (on the face of the order) was not to determine the merits of the alleged cartel conduct through contested evidence, but to determine whether to make the agreed settlement terms an enforceable Tribunal order.

Accordingly, the dispute before the Tribunal principally concerned the application of statutory provisions governing consent agreements and Tribunal orders to an agreed set of facts and admissions, rather than the resolution of factual disputes. The Tribunal’s order as issued did not reflect the determination of contested questions of fact.

4. Court’s Reasoning

The Tribunal’s published decision in this matter was confined to a brief order stating that it confirmed the order as agreed to and proposed by the Competition Commission and the respondent, annexed and marked “A”. No further reasoning was set out in the text of the Tribunal’s decision beyond the confirmation itself.

From the content and structure of the order, the Tribunal’s approach proceeded on the basis that the parties had concluded a consent agreement in terms contemplated by section 49D, and that the Tribunal was being asked to exercise its statutory power under section 58 to confirm that agreement as a Tribunal order. The confirmed agreement included, among other terms, admissions of contravention, cooperation obligations, compliance commitments, and an agreed administrative penalty and payment schedule.

The Tribunal did not, in the text provided, engage in an extended evaluative analysis of the projects, the market effects of the conduct, or the penalty methodology. The decision reflects acceptance of the settlement mechanism provided for in the Act and the parties’ agreement as the basis for granting the confirmation order.

5. Outcome and Relief

The Competition Tribunal confirmed the consent agreement between the Competition Commission and Stefanutti Stocks Holdings Ltd as an order of the Tribunal, as annexed and marked “A”.

The confirmed order incorporated the settlement terms recorded in the consent agreement, including Stefanutti’s admission of contraventions of section 4(1)(b)(iii), its cooperation and future-conduct undertakings, the obligation to submit a competition law compliance programme and circulate a summary statement internally, and the obligation to pay an agreed administrative penalty of R 306 892 664 in instalments, with interest as specified on the fourth payment. The Tribunal’s order as provided did not record a separate costs order.

Cases Cited

No cases were cited in the text provided.

Legislation Cited

Competition Act 89 of 1998 (as amended), including sections 2, 4(1)(b), 19, 21(1), 22, 26, 49B, 49D, 58(1)(a)(iii), 58(1)(b), 59(1)(a), 59(2), 59(3), 59(4), and 67(2).

Constitution of the Republic of South Africa, 1996, section 217.

Rules of Court Cited

No rules of court were cited in the text provided.

Held

The Tribunal made an order confirming the consent agreement concluded between the Competition Commission and Stefanutti Stocks Holdings Ltd as a Tribunal order. The confirmed order reflected settlement of 21 non-prescribed instances of collusive tendering in contravention of section 4(1)(b)(iii) of the Competition Act, together with cooperation and compliance undertakings and payment of an agreed administrative penalty on specified terms.

LEGAL PRINCIPLES

The matter applied the statutory mechanism in terms of which the Competition Commission may conclude a consent agreement with a respondent firm under section 49D of the Competition Act, and may approach the Competition Tribunal to have that agreement confirmed as an order under section 58.

The consent agreement proceeded on the principle that collusive tendering (bid-rigging) constitutes a prohibited restrictive horizontal practice under section 4(1)(b)(iii) of the Competition Act, and may be manifested through arrangements such as cover pricing, losers’ fees, and tender allocation agreements, which distort competitive tender outcomes.

The settlement also reflected the application of the Act’s prescription/time-bar framework (as referenced in the consent agreement by section 67), distinguishing between prescribed and non-prescribed prohibited practices for purposes of settlement scope and penalty calculation, with the administrative penalty in this matter calculated with reference only to the non-prescribed conduct.

The consent order reflected the statutory basis for an administrative penalty under section 58(1)(a)(iii) read with section 59, and recorded that payment to the Commission would be paid over to the National Revenue Fund as contemplated in section 59(4).

Competition Commission v Stefanutti Stocks Holdings Ltd (017038) [2013] ZACT 63 (22 July 2013)