About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Competition Tribunal
SAFLII
>>
Databases
>>
South Africa: Competition Tribunal
>>
2013
>>
[2013] ZACT 64
|
|
Competition Commission v Norvo Construction (Pty) Ltd (017004) [2013] ZACT 64 (22 July 2013)
COMPETITION
TRIBUNAL
Case
No: 017004
In
the matter between:
The
Competition Commission
Applicant
and
Norvo
Construction (Pty) Ltd
Respondent
Panel:
N
Manoim (Presiding Member), Y Carrim (Tribunal Member) and T
Madima (Tribunal Member)
Heard
on:
17
July 2013
Decided
on:
22
July 2013
Order
REPUBLIC
OF SOUTH AFRICA
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 T Madima
IN
THE
COMPETITION
TRIBUNAL
OF
SOUTH
AFRICA
HELD
IN PRETORIA
CT
Case No:
CC
Case no: 2009Feb4279/2009Sep4641
Application
for confirmation of a consent agreement
In
the matter between:
THE
COMPETITION COMMISSION Application
and
NORVO
CONSTRUCTION
(PTY)
LTD Respondent
CONSENT
AGREEMENT IN TERMS OF SECTION
49D
READ
WITH
SECTION
58(1}(a)(iii)
AS
READ WITH
SECTION
58(1)(b)
OF
THE COMPETITION
ACT,
1998
(ACT
NO.
89
OF
1998), AS
AMENDED,
BETWEEN
THE COMPETITION
COMMISSION
AND NORVO CONSTRUCTION (PTY) LTD, IN REGARD TO CONTRAVENTIONS OF
SECTION
4{1)(b)(iii)
OF
THE
COMPETITION ACT,
1998
PREAMBLE
WHEREAS
the
Competition Commission is empowered to,
inter
alia,
investigate alleged contraventions of the
Competition Act, 1998
;
WHEREAS
the
Competition Commission is empowered to,
inter
alia,
conclude consent agreements in terms of
section 49D
of the
Competition Act, 1S98;
WHEREAS
the
Competition Commission has invited firms in the construction industry
to engage in settlement contraventions of the
Competition Act, 1998
;
WHEREAS
Norvo
Construction (Ply) Ltd has accepted the invitation and has agreed
to
settle
in accordance with the terms of the invitation;
NOW
THEREFORE
the
Competition Commission and Norvo Construction (Pty) Ltd hereby agree
that application be made to the Competition Tribunal for
the
confirmation of this consent agreement as an order of the Competition
Tribunal in terms of
section 49D
as read with
sections 58(1)(a)(iii)
and
58
(1 )(b) of the
Competition Act, 1998
.
1.
Definitions'"'
For
the purposes of this consent agreement, unless the context indicates
otherwise,
the following definitions shall apply:
1.1
“Act" means the Competition Act, 1998 (Act No. 89 of
1998), as amended;
1.2.
“CFTP” means the Construction Fast Track Process
announced by the Commission on 1 February 2011 to fast track
the
settlement process and to resolve the Commission's investigations
into the construction industry;
1.3.
“CLP” means the Commission’s Cprporate Leniency
Policy (Government Notice No. 628 of 23 May 2008
f
published in Government Gazette No. 31064 of 23 May 2008);
1.4.
“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), the dti Campus, 77 Meintjies
Street, Sunnyside, Pretoria, Gauteng;
1.5.
“Commissioner”
means
the Commissioner of the Competition Commission, appointed in terms
of section 22 of the Act;
1.6.
“Complaints”
means
the complaints initiated by the Commissioner of the Competition
Commission in terms of section 49B of the Act under case
numbers
2009Feb4279 and 2009Sep4641;
1.7.
“Consent Agreement''
means
this agreement duly signed and concluded between the Commission and
Novo
Construction
(Pty) Ltd (”
Novo
Construction
");
1.8.
“Cover
Price” means generally, a price that is provided by a firm
that
wishes
to win a tender to a firm that does not wish to do so, in order that
the firm that does not wish to win the tender may
submit a higher
price; or a price that is provided by a firm that does not wish to
win a tender to a firm that does wish to win
that tender in order
that the firm that wishes to win the tender may submit a lower
price.
1.9.
“Invitation”
means
the Invitation to Firms in the Construction Industry to engage in
settlement of contraventions of the
Competition Act, as
published on
the website of the Commission on 1 February 2011;
1.10.
“Norvo"
means Norvo Construction (Pty) Ltd, a company duly incorporated
under the laws of the Republic of South Africa
with its principal
place of business at 5 Kiinker Place, Briardene Park, Durban,
Kwazulu Natal.
1.11
“n
on
-p
res
cribed
prohibited
practices”
refers
to prohibited restrictive horizontal practices- relating to- the
construction industry that are contemplated in
section 4(1
)(b) of
the Act and that are on-going or had not ceased three years before
the complaints were initiated, as contemplated in
section 67 of the
Act;
1.12.
“Parties
'
means the Commission and Norvo;
1.13.
“prescribed prohibited practices"
refers
to prohibited restrictive horizontal practices relating to the
construction industry that are contemplated in section
4(1
){b)
of the Act and that ceased after
30
November
1998,
but
more than three years before the complaints were initiated;
1.1.4.
“Respondent”
means
Norvo;
1.1.5.
“Settlement"
refers
to settlement in terms of the invitation to firms in the
construction industry to engage in settlement of contraventions
of
the Act and the procedures detailed therein.
1.16.
“Subsector” refers to the classes of construction work
defined in Schedule 3 of the CIDB Regulations, substituted
by
Government Notice No. 8986 of 14 November 2008, published in
Government Gazette No. 31Q03 of 14 November 2008;
1.
17 ‘Tribunal" means the Competition Tribunal of South
Africa, a statutory body established in terms of section 26
of the
Act, with its principal place of business at 3
rd
Floor, Mulayo building (Block C), the dti Campus, 77 Meintjies
Street, Sunnyside, Pretoria, Gauteng.
2.
The Complaints
2.1.
On 10 February 2009 the Commission initiated a complaint in terms of
section 49B(1) of the Act into alleged prohibited practices
relating
to collusive conduct in the construction of the stadiums for the
2010 FIFA Soccer World Cup against Murray & Roberts
Limited,
Grinaker-LTA Ltd, the construction operating business unit of Aveng
(Africa) Limited, Group Five
Limited,-
Basil-Read (Pty) Ltd, WBHO Construction (Pty) Ltd, , Stefanutti
Stocks Limited, iriterbeton Abu Dhabi" nv lie,
and Bouygues
Construction SA.
2.2.
On 01 September 2009, following the receipt of applications for
immunity in terms of the CLP, the Commission initiated the
Complaint
in terms of section 49B(1) of the Act into prohibited practices
relating to collusion in the construction industry.
The Complaint
concerned alleged contraventions of section 4(1)(b) of the Act as
regards collusive tendering, price fixing and
market allocation in
respect to tenders. The investigation was initiated against the
following firms: Murray & Roberts, Grinaker
LTA Ltd, Aveng
(Africa) Ltd, Stefanutti Stocks Holdings Ltd, Group Five Ltd, Con
cor Ltd, G. Liviero & Son Building (Pty)
Ltd, Giuricich Coastai
Projects (Pty) Ltd, Hochtief Construction AG, Dura Soletanche-Bachy
(Pty) Ltd, Nishimatsu Construction
Co Ltd, Esorfranki Ltd, VNA
Pilings CC, Rodio Geotechnics (Pty) Ltd, Diabor Ltd, Gauteng Piling
(Pty) Ltd, Fairbrother Geotechnfcal
CC, Geomechanics CC, Wilson
Bayly Holmes-Ovcon Ltd and other construction firms, including joint
ventures.
3.
The Invitation to Firms in the Construction Industry to Engage In
Settlement
of
Contraventions of the Act
3.1.
The Commission's investigation of the Complaints, as well as several
others of the Commission’s investigations in the
construction
industry, led the
Commission
to believe that there was widespread collusion in contravention of
section 4(1)(b)(iii) of the Act In the construction
industry.
3.2.
Section 4(1 )(b) provides-
“
4,
Restrictive horizontal practices prohibited
(1)
An agreement between, or concerted practice bv. firms
.
ora
decision
bv
an association of firms, is prohibited if it is between parties in a
horizontal
relationship and if—
(a)
it
has the effect of substantially preventing, or lessening,
competition in a market
,
unless
a party to the agreement, concerted practice, or decision can prove
that any technological, efficiency or other pro-competitive
gain
resulting from it outweighs that effect; or
(b)
it
involves any of the foil owing restrictive horizontal practices:
(i)
directly or indirectly fixing a purchase or selling price or any
other trading condition;
(ii)
dividing
markets by allocating customers, suppliers, territories, or specific
types of goods or services; or
(iii)
collusive
tendering
.’
3.3.
The collusive conduct engaged in, in the context of the Invitation
and this Consent Agreement, was collusive tendering or
“bid-rigging". Collusive tendering involves particular
conduct by firms whereby as competitors they collude regarding
a
tender resulting in the tender process being distorted. The bid
prices and the bid submissions by these competitors as well
as the
outcome of the tender process is not the result of competition on
the merits. “Cover pricing” in this context
occurs when
conspiring firms agree that one or more of them will submit a bid
that is not intended to win the contract. The agreement
is reached
in such a way that among the colluding firms, one firm wishes to win
the tender and the others agree to submit non-competitive
bids with
prices that would be higher than the bid of the designated winner,
or the price wifi be too high to be accepted, or
the bid contains
special terms that are known to be unacceptable to the client,
Collusive tendering therefore applies to agreements
or concerted
practices which have as their object or effect the prevention,
lessening, restriction and distortion of competition
in South
Africa.
3.4.
In terms of section 2 of the Act, two of the key objects of the Act
are to promote the efficiency, adaptability and development
of the
economy, and to provide consumers with competitive prices and
product choices. Section 217 of the Constitution of the
Republic of
South Africa, 1996 calls for a procurement or tender system which is
fair, equitable, transparent, -competitive and
cost-effective,-
3.5.
In addition, the Commission is required
in
terms
of
section 21(1) of the Act,
inter
alia,
to implement measures to increase market transparency, to
investigate and evaluate alleged contraventions of Chapter 2 of the
Act, and to negotiate and conclude consent agreements in terms of
section 49D for confirmation as an order of the Competition
Tribunal
in terms of section 58(1 )(b) of the Act.
3.6.
Therefore, in the interest of transparency, efficiency, disrupting
cartels and incentivising competitive behavior in the
construction
industry and a cost- effective, comprehensive and speedy resolution
of the investigations referred to above, the
Commission decided to
fast track these investigations and their resolution by inviting
firms that were involved in collusive
tendering in the form of
bid-rigging of projects in the construction industry, to apply to
engage in settlement on the terms
set out in the Invitation.
3.7.
On 1 February 2011 the Commission issued a media release about the
Invitation and published same on its website. In the Invitation,
hereto attached and marked as Annexure
A,
the
Commission offered firms the opportunity to settle the alleged
contraventions of the Act, if they would:
3.7.1.
submit an application in terms of PART 2 of the Invitation;
3.7.2.
agree to pay an administrative penalty or penalties determined by
the Commission as envisaged in paragraph 10.2 read with
paragraphs
19-28 of the Invitation; and
3.7.3.
comply with the requirements of the settlement process as set out in
PART 1 and PART 3 of the Invitation.
3.8.
This agreement sets out the details of the non-prescribed prohibited
practices
only,
which the respondent Is iiabie to settle regard being had to the
provisions of section 67(2) of the Act and the penalty
is calculated
taking into account only the said non-prescribed prohibited
practices.
3.9.
Applying firms were required to
inter
alia
provide the Commission with truthful and timely disclosure of
information and documents relating to the prohibited practices
and
to provide full and expeditious co-operation to the Commission
concerning the prohibited practices.
3.10.
An applying firm could request the Commission to consider its
application in terms of the Invitation as an application for
a
marker or as an application for immunity under the CLP. Firms could
also apply for a marker or for immunity under the CLP before
making
an application in terms of the invitation.
3.11.
The deadline to apply for a settlement in terms of the Invitation
was 12h00 on 15 April 2011.
4..
Application by
Norvo
Construction
4.1.
Norvo applied for leniency and Settlement in terms of the
invitation. Norvo specializes in the major building works including
shopping centers, office blocks, residential buildings and turnkey
industrial projects.
4.2.
Norvo applied for leniency and Settlement and disclosed one (1) non
prescribed prohibited practice which falls in the General
Building
sub-sector.
4.3.
Norvo was not the first to apply for this prohibited practice, and
is therefore settling it In terms of this Consent Agreement.
4.4.
The prohibited practice or contravention by Norvo of section
4(1)(b)(iii) of the Act which is the subject of the Consent
Agreement is set out below.
5.
Disclosed Project
Tamboti
at Simbithi Estates
(Tender
Ref
no.
D630)
Norvo
reached agreement with G Liviero & Son Building (Pty) Ltd (“G
Liviero”) on or about May 2004 in that they
agreed to add a
loser's fee in the tender for the Tamboti project. In terms of the
agreement they agreed that G Liviero would
win the tender and then
pay the loser’s fee in the amount of R113 971.50 to Norvo. In
line with the agreement, the tender
was awarded to G Liviero, and
the loser’s fee was paid to Norvo. The last payment made by G
Liviero was in November 2006.
This conduct Is collusive tendering in
contravention of section 4(1)(b)(iu) of the Act.
This
project was for the construction of a bfock of residential flats at
the Simbithi Estates for Cedar Trading (Pty) Ltd, The
project was
completed in November 2006
'
6.
Admission
Norvo
Construction admits that it was involved in collusive conduct In
contravention of section 4(1)(b)(m) of the Act in that
it tendered
colfusiveiy in respect of the prohibited practice set out in
paragraph 5 above.
7.
Co-operation
In
so far as the Commission is aware, and in compliance with the
requirements as set out in the Invitation, Norvo:
7.1.
has provided the Commission with truthful and timely disclosure,
including information and documents in its possession or
under its
control, relating to the prohibited practices;
7.2.
has provided full and expeditious co-operation to the Commission
concerning the prohibited practices;
7.3.
has provided a written undertaking that it has immediately ceased to
engage in, and will not in the future engage in, any
form of
prohibited practice;
7.4.
has confirmed that it has not destroyed, falsified or concealed
information, evidence and documents relating to the prohibited
practices;
7.5.
has-confirmed that It has - not misrepresented or made a wilful or
negligent misrepresentation concerning the material facts
of any
prohibited practice or otherwise acted dishonestly.
8.
Agreement Concerning Future Conduct
8.1.
In compliance with the requirements as set out in the Invitation,
Norvo
agrees
and undertakes to provide the-Com mission with full and expeditious
co-operation
from the time that this Consent Agreement is concluded untii the
subsequent proceedings in the Competition Tribunal
or the
Competition Appeal Court are completed, This includes, but is not
limited to:
8.1.1.
To the extent that it is in existence and has not yet been provided,
providing (further) evidence, written or otherwise,
which is in its
possession or under its control, concerning the contraventions
contained in this Consent Agreement;
8.1.2.
Norvo will avail its employees and former employees to testify as
witnesses for the Commission In any cases regarding the
contraventions contained in this Consent Agreement;
8.1.3.
Norvo shall develop, implement and monitor 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.
8.2.
Norvo shall develop, implement and monitor 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. In particular,
such
compliance programme will
include
mechanisms for the monitoring and detection of any contravention of
the Act.
8.3.
Norvo shall submit a copy of such compliance programme to the
Commission within 60 days of the date of confirmation of the
Consent
Agreement as an order by the Competition Tribunai.
8.4.
Norvo shall circulate a statement summarising the contents of this
Consent Agreement to all management and operational staff
employed
at Norvo within 50 days from the date of confirmation of this
Consent Agreement by the Tribunal,
8.5.
Norvo will not in the future engage in any form of prohibited
conduct and will not engage, in collusive tendering which will
distort the outcome of tender processes but undertakes henceforth to
engage in competitive bidding.
9.
Administrative
Penalty
9.1.
Having regard to the provisions of sections 58(1)(a)(m) as read with
sections 59(1 )(a), 59(2) and 59(3) of the Act, and
as envisaged in
paragraph 10.2 read with paragraphs 19-28 of the Invitation, Norvo
accepts that it is liable to. pay an administrative
penalty
("penalty
1
'},
9.2.
According to the Invitation, the level of the penalty is to be set
on the basis of a percentage of the annual turnover of-Norvo
in the
relevant subsector in the Republic and its exports from the Republic
for the financial year preceding the date of the
Invitation.
9.3.
The project which Norvo has been found to have contravened the Act,
falls under the General Building CIDB subsector.
9.4.
Accordingly, Norvo is liable for and-has agreed to pay an
administrative penalty in the sum of R 714 897 (Seven Hundred and
Fourteen Thousand Eight Hundred and Ninety Seven Rand) which penalty
is calculated in accordance with the Invitation.
10.
Terms of payment
10.1.
Norvo will pay the amount set out above [In paragraph 9.4] to the
Commission within 30 days from the date of confirmation
of this
Consent agreement fay the Tribunal.
10.2.
This payment shall be made into 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
Brach
Code: 323 345
10.3.
The penalty will be paid over by the Commission to the National
Revenue Fund in accordance with section 59(4) of the Act.
11.
Full and Final Settlement
This
agreement is entered into in full and final settlement of the
specific conduct listed in paragraph 5 above, and upon confirmation
as art order by the Tribunal, concludes all proceedings between the
Commission and Norvo in respect of this conduct only.
Dated
and signed at DURBAN on the
22
day of APRIL 2013,
For
Norvo
[FILL
IN
NAME
AND
POSITION
OF
PERSON THAT
IS
SIGNING]
Dated
and signed at PRETORIA on the
21
day of JUNE 2013,
For
the Commission
Shan
Ramburuth
Commissioner