Competition Commission v Raubex (Pty) Ltd (017012) [2013] ZACT 65 (22 July 2013)

80 Reportability

Competition Law

Brief Summary

Competition Law — Consent Agreement — Collusive tendering — Competition Commission and Raubex (Pty) Ltd entering into a consent agreement regarding contraventions of section 4(1)(b) of the Competition Act, 1998 — Raubex admitting to collusive 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

These proceedings took the form of an application to the Competition Tribunal for the confirmation of a consent agreement concluded between the Competition Commission and Raubex (Pty) Ltd, as contemplated in section 49D read with section 58(1)(a)(iii) and section 58(1)(b) of the Competition Act 89 of 1998.

The Competition Commission was the applicant and Raubex (Pty) Ltd the respondent. The matter was heard by a panel comprising N Manoim (Presiding Member), Y Carrim, and T Madima. The Tribunal heard the application on 17 July 2013 and issued its decision on 22 July 2013.

The procedural history reflected in the judgment arises from complaints initiated by the Commission in February 2009 and September 2009 into collusive conduct in the construction industry (including collusive tendering), followed by the Commission’s Construction Fast Track Process invitation issued on 1 February 2011 to resolve construction cartel investigations through settlement. Raubex participated in this settlement process, resulting in a signed consent agreement dated 10 May 2013 (Raubex) and 21 June 2013 (Commission).

The general subject-matter of the dispute concerned restrictive horizontal practices, specifically collusive tendering (“bid-rigging”) in the civil engineering subsector, in contravention of section 4(1)(b)(iii) of the Competition Act, and the appropriate administrative penalty and compliance undertakings to resolve the Commission’s investigation as against Raubex.

2. Material Facts

The material background facts accepted for purposes of the Tribunal’s order were that the Commission initiated an investigation on 10 February 2009 into alleged collusive conduct relating to construction of stadiums for the 2010 FIFA Soccer World Cup, and later, on 1 September 2009, initiated a further complaint following applications under the Commission’s Corporate Leniency Policy. The September 2009 complaint concerned alleged contraventions of section 4(1)(b) (including collusive tendering, price fixing, and market allocation) in the construction industry involving numerous construction firms.

Against this investigative backdrop, the Commission publicly issued an Invitation on 1 February 2011 to firms in the construction industry to engage in settlement (the construction fast-track process), in order to bring about a comprehensive and speedy resolution of investigations and to address what the Commission described as widespread collusion in contravention of section 4(1)(b)(iii). The settlement process contemplated truthful disclosure, cooperation, cessation undertakings, and the payment of an administrative penalty calculated with reference to turnover in the relevant subsector.

Raubex applied for leniency and settlement under the Invitation and disclosed nine contraventions (described as eight projects and one meeting) falling within the civil engineering subsector. The consent agreement recorded that Raubex was not the first applicant in relation to the prohibited practices it disclosed, and therefore it remained liable to settle those disclosed contraventions through the consent agreement.

The contraventions set out in the consent agreement comprised collusive tendering conduct in the form of cover pricing and tender allocation arrangements. The disclosed conduct included a 2006 Road Constructors meeting at which Raubex and other firms reached agreement to allocate road construction tenders and to submit non-competitive bids where firms were not allocated a project. In addition, the projects described in the agreement involved cover pricing arrangements in relation to SANRAL road rehabilitation or upgrading tenders, including agreements with other construction firms (identified in the consent agreement) whereby Raubex either provided cover prices to competitors or received cover prices from competitors, with the stated purpose and effect of ensuring a designated firm would win the relevant tender.

In the consent agreement, Raubex admitted that it was involved in collusive conduct in contravention of section 4(1)(b)(iii) by tendering collusively in relation to the conduct described. The agreement also recorded, in so far as the Commission was aware, that Raubex had provided truthful and timely disclosure, furnished full and expeditious cooperation, undertaken that it had ceased prohibited practices and would not engage in them in future, and confirmed it had not destroyed or concealed relevant information, nor misrepresented material facts.

The consent agreement further contained forward-looking commitments, including cooperation in any subsequent proceedings, the availability of employees and former employees to testify, and the development, implementation, monitoring, and submission to the Commission of a competition law compliance programme within 60 days of confirmation of the consent agreement. Raubex also undertook to circulate a statement summarising the consent agreement to management and operational staff within 60 days of confirmation.

For purposes of remedy, Raubex agreed to pay an administrative penalty of R58 826 626 calculated in accordance with the Invitation and with reference to annual turnover in the relevant subsector, payable within 30 days of the Tribunal’s confirmation of the consent agreement.

3. Legal Issues

The central legal question before the Tribunal was whether the consent agreement concluded between the Commission and Raubex should be confirmed as an order of the Tribunal under section 49D read with section 58(1)(a)(iii) and section 58(1)(b) of the Competition Act.

The dispute, as presented in the judgment, did not turn on contested factual questions about the underlying collusive conduct, because the consent agreement contained an express admission of contravention by Raubex and recorded the settlement terms. The Tribunal’s task was accordingly primarily one of applying the statutory mechanism for consent agreements to the facts and terms presented, and making an order in accordance with the agreed settlement.

The matter therefore concerned the application of law to largely common-cause facts (as embodied in the consent agreement), rather than a value judgment on liability following adversarial proceedings. The evaluative component was limited to the Tribunal’s institutional role in issuing an order that confirms the agreement reached by the parties under the Act’s settlement framework.

4. Court’s Reasoning

The Tribunal’s reasoning, as reflected in the brief judgment, was confined to confirming the order as agreed to and proposed by the Competition Commission and Raubex, annexed and marked “A”. The Tribunal did not engage in extended analysis of the prohibited practices, the penalty calculation, or the compliance measures in the text of the decision itself, but proceeded on the basis that the matter was before it as an application for confirmation of a consent agreement.

The legal framework implicit in the Tribunal’s approach was that the Competition Act expressly authorises the Commission to conclude consent agreements (section 49D) and empowers the Tribunal to confirm such agreements as orders (section 58(1)). The consent agreement itself set out the factual admissions, identified the contraventions as falling within section 4(1)(b)(iii), and set out the agreed administrative penalty and compliance undertakings, all within the settlement process established by the Commission for the construction industry.

Consistent with that framework, the Tribunal’s function in this decision was essentially to give formal legal effect to the settlement reached between the regulator and the firm, thereby finalising the proceedings between them in respect of the specific conduct listed in the consent agreement.

5. Outcome and Relief

The Tribunal confirmed the consent agreement between the Competition Commission and Raubex (Pty) Ltd as an order of the Competition Tribunal, as reflected in the annexure marked “A”.

As confirmed, the order included (as recorded in the consent agreement) Raubex’s acceptance of liability for collusive tendering in contravention of section 4(1)(b)(iii), its cooperation and future-conduct undertakings (including the implementation and submission of a compliance programme), and payment of an administrative penalty of R58 826 626 within 30 days of confirmation.

No separate or additional order as to costs is recorded in the judgment.

Cases Cited

No cases were cited in the judgment.

Legislation Cited

Competition Act 89 of 1998 (as amended), including sections 4(1)(b)(iii), 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.

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

Construction Industry Development Regulations, 2004 (as amended) (Government Notice No. 692 of 9 June 2004, published in Government Gazette No. 26427 of 9 June 2004), including reference to Schedule 3 as substituted by Government Notice No. 8986 of 14 November 2008, published in Government Gazette No. 31603 of 14 November 2008.

Corporate Leniency Policy (Government Notice No. 628 of 23 May 2008, published in Government Gazette No. 31064 of 23 May 2008).

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The Competition Tribunal confirmed, as an order, the consent agreement concluded between the Competition Commission and Raubex (Pty) Ltd under section 49D of the Competition Act. The confirmed order gave effect to Raubex’s settlement of disclosed non-prescribed prohibited practices amounting to collusive tendering prohibited by section 4(1)(b)(iii), including the agreed administrative penalty and the firm’s cooperation and compliance programme undertakings.

LEGAL PRINCIPLES

A consent agreement concluded between the Competition Commission and a respondent firm under section 49D of the Competition Act 89 of 1998 may be made binding and enforceable through confirmation by the Competition Tribunal as an order under section 58(1).

Collusive tendering, including bid-rigging practices such as cover pricing and tender allocation arrangements, constitutes a form of restrictive horizontal practice prohibited by section 4(1)(b)(iii) of the Competition Act.

Within the statutory settlement framework reflected in the consent agreement, an administrative penalty may be agreed and confirmed under sections 58 and 59 of the Competition Act, together with forward-looking undertakings directed at cessation, cooperation, and the implementation of a competition law compliance programme to prevent future contraventions.