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[2013] ZACT 66
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Competition Commission v Haw & Inglis Civil Engineering (Pty) Ltd (016980) [2013] ZACT 66 (22 July 2013)
COMPETITION
TRIBUNAL
REPUBLIC
OF SOUTH AFRICA
Case
No: 016980
In
the matter between:
The
Competition Commission Applicant
and
Haw
& Inglis Civil Engineering (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
The
Tribunal hereby confirms the order as agreed to and proposed by the
Competition Commission and the respondent, annexed hereto
marked “A”
and the addendum thereto marked “B.
Presidjng
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. 2009Feb4279/20D9Sep4641
Application
for confirmation of a consent agreement
In
the matter between:
THE
COMPETITION COMMISSION
Applicant
and
HAW
& INGLIS CIVIL ENGINEERING (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 , HAW
&
INGLIS
CIVIL
ENGINEERING (PTY) LTD ("HAW
&
INGLIS")
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, 1998
;
WHEREAS
the
Competition Commission has invited firms in the construction
industry to engage in settlement of contraventions of the
Competition Act, 1998
;
WHEREAS
Haw
& Inglis Civil Engineering (Pty) Ltd has accepted the invitation
and has agreed to settle in accordance with the terms
of the
invitation;
NOW
THEREFORE
the
Competition Commission and Haw
&
ingiis Civil Engineering (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 the following definitions
shall apply:
1.1.
"Act"
means the Competition Act, 1998 (Act No. 89 of 1998), as amended;
1.2.
"CIDB”
means the Construction industry Development Board;
1.3.
”CIDB Regulations”
refers
to the 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);
1.4.
"CLP"
means
the Commission’s Corporate Leniency Policy (Government Notice
No. 628 of 23 May 2008, 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;
1.6.
“
Commissioner"
means the Commissioner of the Competition Commission,
appointed
in terms of section 22 of the Act;
1.7.
"Complaint"
means the complaints initiated by the Commissioner of the
Competition Commission in terms of section 49B of the Act under case
number 2009Feb4279 and 2009Sep4641;
1.8.
"Consent
Agreement
”
means this agreement duly signed and concluded between the
Commission and Haw & inglis;
1.9.
"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 alternatively 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.
1.10.
"Haw
&
Inglis"
means Haw & Inglis Civil Engineering (Pty) Ltd a company
incorporated under the laws of the Republic of South Africa with
its
principal place of business at Hillcrest Estate, Racecourse Road,
Durbanville with, registration no 1969/008806/07. Haw &
Inglis
main business is Civil Engineering work;
1.11.
‘’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;
1.12.
"Non-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 are on-going or had not ceased three years
before the complaints were initiated, as contemplated
In section 67
of the Act;
1.13.
"Parties”
means the Commission and Haw & Inglis;
1.14
.
"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;
1.15.
"Respondent"
means Haw& Inglis Civil Engineering (Pty) Ltd;
1.16.
"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;
1.17.
"Sub-sector of the construction industry"
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. 31603 of 14
November 2008; and
1.18.
"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 3rd Floor, Muiayo building (Block C), the dti
Campus, 77 Meintjies Street, Sunnyside, Pretoria, Gauteng.
2.
The
Complaint
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 Grinaker-LTA the
construction
operating' business unit of Aveng, Group Five
Limited,
Basil Read (Pty) Ltd, WBHO Construction (Rty) Ltd, Murray Roberts
Limited, Stefanutti Stocks Limited, Interbeton Abu Dhabi nv He and
Bouygues Construction SA.
2.2.
In addition, on 01 September 2009, following the receipt of
applications for immunity in terms of the Commissions Corporate
Leniency Policy (CLP), the Commission initiated a complaint in terms
of section 49B(1) of the Act into particular prohibited
practices
relating to conduct in construction projects, by the firms listed
below. The complaint concerned alleged contraventions
of section
4(1)(b) of the Act as regards price fixing, market allocation and
collusive tendering. The investigation was initiated
against the
following firms: Grinaker- LTA (the construction operating business
unit of Aveng, Aveng (Africa) Ltd, Stefanutti
Stocks Holdings Ltd,
Group Five Ltd, Murray & Roberts, Con cor Ltd, G. Liviero &
Son Building (Pty) Ltd, Giuricich Coastal
Projects (Pty) Ltd,
Hochtief Construction AG, Dura Soletanche-Bachy (Pty) Ltd,
Nishimatsu Construction Co
Ltd
Esorfrank Ltd, VNA Pilings CC, Rodio Geotechnics (Pty) Ltd, Diabor
Ltd, Gauteng Piling (Pty) Ltd, Fairbrother Geotechnical
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 prohibite
d
(1)
An agreement between
.
or
concerted practice bv. firms
.
or
a
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 following 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 over 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 will
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, 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, developing
the performance of the construction industry, incentivising
competitive behaviour, disrupting cartels 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 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 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 contains the details of the non-prescribed prohibited
practices and the calculation of the penalty is based
on the
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
Friday
15 April 2011.
4.
Application for settlement by Haw and inglis
4.1.
On 15 April 2011 Haw & Inglis applied for leniency and
Settlement in terms of the Invitation.
4.2.
In its application Haw
&
Inglis applied and disclosed ten (10) prohibited practices (9
projects and 1 meeting). Two. (2) out of the 10 prohibited practices
are prescribed, leaving 8 non-prescribed prohibited practices.
4.3.
Haw & Inglis was first to apply for two (2) non-prescribed
prohibited practices and was granted Conditional Immunity
in terms
of the CLP for these two prohibited
practices.
4.4.
Haw & Inglis is therefore liable to settle the remaining six (5
projects and 1 meeting) prohibited practices.
4.5.
The six (6) prohibited practices or contraventions (all of which are
in the civii engineering sub-sector) by Haw & inglis
of section
4(1)(b)(iii) of the Act which are the subject of this Consent
Agreement, are set out below.
5.
DISCLOSED PROJECTS
5.1.
Rehabilitation of N1- Springfontein (Tender no. N001-130-2004/1)
Haw
& Inglis reached an agreement with Raubex (Pty) Ltd (Raubex) and
Grinaker-LTA on or about June 2006 in respect of the
Rehabilitation
of N1- Springfontein Project, In that, Haw & Inglis, Raubex and
Grinaker-LTA agreed not to submit tenders
for this -project- This
conduct-is- collusive tendering in contravention of section
4(1)(b)(iii) of the Act The project was awarded
to Blacktop Surfaces
(Pty) Ltd.
5.2.
SANRAL: N11 Amersfoort to Ermelo
(Tender
no. NRA N011- 067- 2003/9)
Haw
& inglis reached agreement with Raubex on or about January 2007,
in that they agreed on a cover price in respect of the
rehabilitation of the national route
11,
Section
6 & 7 from Amersfoort to Ermelo project. In terms of the
agreement, Haw & Inglis provided Raubex with a cover
price to
enable Raubex to win the tender. In fine with the collusive
agreement, Raubex was awarded the tender. This conduct is
collusive
tendering in contravention of section 4(1)(b)(iii) of the Act. This
project was for the rehabilitation of the national
route 11, Section
6 & 7 from Amersfoort to Ermelo: The project is on-going:
5.3.
SANRAL: N2 Section 10-Gamtoos to Van Stadens River
(Tender no, NRA N002-100-2005/1)
Haw
& inglis reached an agreement with Grinaker-LTA on or about 30
June 2006 in respect of the SANRAL: N2 Section 10- Gamtoos
to Van
Stadens River Project, in terms of the agreement, Haw & ingiis
provided a cover price to Rand Roads, a business unit
of Grinaker
LTA to enable Rand Roads to
win
the tender. The tender was, however, not awarded to Rand Roads but
to Koelro Construction, which was not party to the cover price
arrangement. This conduct is collusive tendering in contravention of
section 4(1)(b)(iii) of the Act. The tender, which was for
the
rehabilitation of N2 section 10- Gamtoos to Van Stadens River was
completed on 01 August 2007.
5.4.
Eastern Cape Government: Upgrading of the Mount Frere
(Tender no. SCMU 10 - 06/07 - 0043)
Haw
& inglis reached an agreement with WBHO Construction (Pty) Ltd
("WBHO”) and Rumdel Construction (Pty) Ltd ("Rumdel”)
on or about July 2006 in respect of the Eastern Cape Government:
Mount Frere Project, in that, Haw & Inglis agreed to provide
a
cover price to WBHO and to Rumdei to enable WBHO to win the tender.
The project was awarded to WBHO in line with the cover
price
arrangement. This conduct is collusive tendering in contravention of
section 4(1)(b)(iii) of the Act. The tender was for
the upgrading of
the district road including earthworks, paving, structure and
drainage. The project was completed on 14 June
2010.
5.5.
SANRAL: Upgrading of Trunk Road 57/3 from Alice to Middled rift
(Tender
no. NRA POO2 — 030 — 2006/1)
Haw
& inglis reached an agreement with Raubex, WBHO and Rumdel on or
about August 2006 in respect of the SANRAL upgrading
of the Trunk
Road 57/3 from Alice to Micfdiedrift Project. In terms of the
agreement, Haw
&
inglis provided cover prices to Raubex, WBHO and Rumdel to ensure
that they submit uncompetitive bids to enable Haw & Inglis
to
win the tender. The tender was awarded to Haw & Inglis in
accordance with the cover price arrangement. This conduct is
collusive tendering in contravention of section 4(1)(b)(iii) of the
Act. The tender was for the upgrading of Trunk Road 57/3
from Alice
to Middledrift for SANRAL. The project was completed on 16 November
2008.
5.6.
2006
Road
Contractors Meetings (Johannesburg)
Haw
Inglis reached agreement with Basil Read, Concor, Raubex, Grinaker
LTA and WBHO at the 2006 Road Contractors Meeting, in that,
these
firms who were attendees at the 2006 Road Contractors Meeting agreed
to allocate tenders for the construction of roads,
and that firms
who were not interested in the project or in winning the tender or
were not allocated a project would submit uncompetitive
bids to
ensure that those that were interested in winning particular bids,
won them. This conduct is collusive tendering in contravention
of
section 4(1)(b) (iii) of the Act.
6.
Admission
Haw
& Inglis admits that it entered into the agreements detailed in
paragraphs 5.1 to
5.6.
above
with its competitors in contravention of section 4(1)(b)(iil) of the
Act.
7.
Co-operation
In
so far as the Commission is aware, and in compliance with the
requirements as set out in the Invitation, Haw & inglis –
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, Haw & Inglis agrees
and undertakes to provide the Commission with full and expeditious
cooperation from the time that this Consent Agreement is
concluded until the subsequent proceedings in the 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.
testifying as a witness for the Commission in any cases regarding
the contraventions contained in this Consent Agreement,
8.2.
Haw & inglis 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 the following -
8.2.1.
a Competition Policy to be drafted and implemented by Haw &
Inglis;
8.2.2.
provide
for specific training on competition law aspects particularly
relevant to Haw& Inglis;
8.2.3.
ensure
that such training will be made available to all new employees
joining Haw & inglis. Furthermore, Haw & Inglis
will update
such training annually.
8.3.
Haw & Inglis 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 Tribunal; and
8.4.
Haw
&
Ingiis shall circulate a statement summarising the contents of this
Consent Agreement to all management and operational staff
employed
at Haw
&
Inglis within 60 days from the date, of confirmation of this Consent
Agreement by the Tribunal.
8.5.
According to the written undertaking it has provided in compliance
with the requirements as set out in the Invitation, Haw
& Inglis
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)(iii) 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, Haw
&
ingfis accepts that it is liable to pay an administrative penalty
("penalty
”
).
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
Haw &
inglis 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 prohibited practices which Haw & Inglis has been found to
have contravened the Act, fall under the Civil Engineering
sub-sector,
9.4.
Accordingly, Haw & inglis is liable for and has agreed to pay an
administrative penalty in the sum. of R45 314 041 (Forty
Five
Million Three Hundred and Fourteen Thousand and Forty One Rand)
which penalty Is calculated in accordance with the Invitation.
10.
Terms of payment
10.1.
Haw & inglis shall 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
as an order of the Tribunal.
10.2.
This payment shall be made into the Commission’s bank account,
details of which are as follows:
Bank
name:
Branch
name:
Account
holder: Competition Commission Fees Account
Account
number: 4050778576
Account
type:
Brach
Code:
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 paragraphs 5.1 to
5.6 of this consent agreement and, upon confirmation
as an order by
the Tribunal, concludes all proceedings between the Commission and
Haw & Inglis in respect of this conduct
only.
Dated
arid signed at DURBANVILLE
on
the
4
th
day
of
JUNE
2
013
For
Haw & Inglis
[FILL
IN
NAME
AND
POSITION OF PERSON THAT IS SIGNING]
Dated
and signed at PRETORIA
on
the
21
st
day
of
JUNE
2
013
For
the Commission
Shan
Ramburuth
ADDENDUM
TO THE CONSENT AGREEMENT BETWEEN THE COMMISSION AND HAW &
INGLIS, RELATING TO TERMS OF PAYMENT
1.
The Commission and Haw &lng!is agree that Haw & Inglis shall
pay the amount set out In paragraph 9.4 of the consent
agreement as
follows:
1.1.
The first payment of 15104 630 (fifteen million one hundred and four
thousand six hundred and eighty rand), payable within
30 days after
the Tribunal’s order;
1.2.
The second payment of 15 104 BB1 (fifteen million one hundred and
four thousand six hundred and eighty one rand), payable
exactly six
months after the first payment; and
1.3.
The third payment of 15 104 680 (fifteen million one hundred and
four thousand six hundred and eighty rand), payable exactly
six
months after the second payment
2.
The
above terms substitute the terms stipulated in paragraph 10.1 of the
consent agreement
DATED
AND SIGNED AT DURBANVILLE ON THE 15TH DAY OF JULY 2013
Dated
and signed at PRETORIA
on
the
16
th
day
of
JUNE
2
013
For
the Commission
Shan
Ramburuth