Brief Summary

Competition Law — Consent Agreement — Collusive tendering — Competition Commission initiating complaint against G Liviero & Son Building for contraventions of section 4(1)(b)(iii) of the Competition Act — Respondent agreeing to settle allegations of collusion in tendering processes — Tribunal confirming consent agreement as an order — Conduct involved collusive practices in construction projects, specifically bid-rigging and cover pricing.

Comprehensive Summary

Summary of Judgment

1. Introduction

These proceedings took the form of an application for confirmation of a consent agreement concluded between the Competition Commission of South Africa (the applicant) and G Liviero & Son Building (Pty) Ltd (the respondent). The matter was heard by the Competition Tribunal (Manoim (Presiding Member), Carrim and Madima) on 17 July 2013 and decided on 22 July 2013.

The procedural history reflected in the judgment and annexed consent agreement was that the Commission had initiated complaints in February 2009 and September 2009 into collusive conduct in the construction industry, including conduct associated with tendering for major projects. Following these investigations, and in the context of a broader settlement initiative in the construction industry, the Commission invited firms to engage in settlement. G Liviero applied under that invitation process, made disclosures, and ultimately concluded a consent agreement with the Commission. The Tribunal proceedings concerned the Commission’s request that the consent agreement be confirmed as an order of the Tribunal.

The general subject-matter of the dispute concerned alleged collusive tendering (bid-rigging) in contravention of section 4(1)(b)(iii) of the Competition Act, and the appropriate regulatory consequences in the form of an agreed administrative penalty and forward-looking compliance obligations.

2. Material Facts

The material factual basis for the Tribunal’s order was contained in the consent agreement concluded between the Commission and G Liviero, which set out the context of the Commission’s investigations, G Liviero’s disclosures, and the specific instances of collusive tendering that were settled.

It was 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. A further complaint was initiated on 1 September 2009, following applications for immunity under the Commission’s Corporate Leniency Policy, concerning alleged contraventions of section 4(1)(b) (including price fixing, market allocation, and collusive tendering) across a range of construction projects, and naming numerous firms, including G Liviero.

The Commission’s investigations led it to believe there was widespread collusion in the construction industry in contravention of section 4(1)(b)(iii). In response, the Commission issued an Invitation to Firms in the Construction Industry to Engage in Settlement of Contraventions of the Competition Act, published on 1 February 2011, which provided a process for settlement subject to specified disclosure, cooperation, and penalty parameters.

Against that background, G Liviero applied for leniency and settlement on 14 April 2011, initially disclosing seven prohibited practices, and later (on 15 December 2011) providing additional information that included three further prohibited practices. The consent agreement recorded an overall disclosure of ten prohibited practices, of which six were described as prescribed and four as non-prescribed, and also recorded that G Liviero was implicated in two additional projects that it did not disclose, one prescribed and one non-prescribed, which it agreed to settle.

The consent agreement identified two contraventions by G Liviero of section 4(1)(b)(iii) that constituted the subject-matter of the settlement embodied in the consent agreement.

First, under the heading “Disclosed Project”, the agreement recorded that in or about May 2004 G Liviero reached an agreement with WBHO, Group Five, Norvo Construction (Pty) Ltd, and Concor in relation to the Tamboti at Simbithi Estates project (Tender no. D680). The agreement entailed adding a “loser’s fee” to the respective bid prices so that the winning bidder would pay the fee to the losing bidders. The project involved construction of 66 units of luxury residential apartments at Tamboti, Lot 6, Simbithi Eco-Estates, Ballito, for the client Cedar Trading 138 (Pty) Ltd. The tender was awarded to G Liviero and completed in November 2006, with the last payment of the loser’s fee recorded as occurring in November 2006.

Second, under the heading “Non-Disclosed Project”, the agreement recorded that in or about November 2006 G Liviero reached an agreement with Vlaming (Pty) Ltd concerning the Nicol Apartments project (Tender no. BJ1139). The agreement was that Vlaming would provide G Liviero with a cover price to enable Vlaming to win the tender, and G Liviero requested payments of R100 000.00 from Vlaming to cover tendering costs. The project involved construction of a high-rise building comprising 80 residential apartments for the client Precoated Metals. The tender was awarded to Vlaming and the project was completed on 3 October 2008.

On these stated facts, G Liviero admitted that it entered into the agreements described in relation to these two projects, and admitted that this conduct constituted collusive tendering in contravention of section 4(1)(b)(iii) of the Act. The agreement also recorded, “in so far as the Commission is aware,” that G Liviero had provided truthful and timely disclosure, provided full cooperation, confirmed cessation of prohibited practices, and confirmed it had not destroyed or concealed information or misrepresented material facts.

In addition to the admission and cooperation undertakings, the consent agreement recorded agreed future conduct obligations, including the development and implementation of a competition law compliance programme, submission of that programme to the Commission within 60 days of confirmation of the consent agreement as an order, circulation of a statement summarising the consent agreement to management and operational staff within 60 days, and an undertaking not to engage in prohibited conduct, including collusive tendering, in the future.

The consent agreement further recorded an agreed administrative penalty of R2 011 078, calculated in accordance with the Commission’s settlement invitation and on the basis that the relevant projects fell under the General Building subsector. It recorded agreed payment terms, namely three instalments: R500 000 within 30 days of confirmation; R500 000 by 31 March 2014; and R1 011 078 by 30 June 2014.

3. Legal Issues

The central legal question before the Tribunal, as reflected in the order and the structure of the proceedings, was whether the Tribunal should confirm the consent agreement concluded between the Commission and G Liviero as an order of the Tribunal in terms of the Competition Act provisions governing consent agreements and Tribunal orders.

This dispute was primarily concerned with the application of law to an agreed factual and procedural settlement rather than an adjudication of disputed facts. The consent agreement contained an express admission by G Liviero of conduct contravening section 4(1)(b)(iii), and the Tribunal proceedings were directed at the statutory mechanism for converting that agreement into a Tribunal order, together with the agreed administrative penalty and behavioural remedies.

Within the framework set by the consent agreement, the relevant legal characterisation concerned whether the conduct described constituted collusive tendering as contemplated by section 4(1)(b)(iii), and whether the statutory requirements for an enforceable consent order—particularly the Tribunal’s powers to confirm such agreements—were satisfied on the papers placed before it.

4. Court’s Reasoning

The Tribunal’s published decision was expressed in the form of an order confirming the consent agreement “as agreed to and proposed by the Competition Commission and the respondent.” The judgment itself did not set out extended reasons or an analysis resolving contested matters, and it did not reflect any factual disputes requiring determination.

The consent agreement, which was annexed to and confirmed by the Tribunal’s order, framed the underlying legal principles applied. It recorded that the Commission is empowered to investigate contraventions of the Competition Act and to conclude consent agreements under section 49D. It also recorded that the Tribunal may confirm such a consent agreement as an order of the Tribunal in terms of section 58(1)(a)(iii) read with section 58(1)(b).

On the substantive competition law issue, the agreement set out section 4(1)(b) of the Act and treated the conduct described—cover pricing and loser’s fees in tendering—as falling within collusive tendering (bid-rigging) contemplated by section 4(1)(b)(iii). The agreement also linked the settlement framework to the Commission’s broader objectives of market transparency, cartel disruption, and efficient resolution of investigations, and referenced constitutional procurement values under section 217 of the Constitution.

In confirming the consent agreement, the Tribunal gave effect to the statutory settlement mechanism contemplated in the Act: the agreed admission of contravention, the agreed administrative penalty (calculated on the basis described in the invitation process and linked to the relevant subsector), and the agreed forward-looking commitments (cooperation, compliance programme, and internal circulation obligations). The Tribunal’s role, on the face of the decision, was not to re-litigate the merits but to formalise and enforce the settlement reached by the parties through confirmation as a Tribunal order.

5. Outcome and Relief

The Competition Tribunal confirmed the consent agreement concluded between the Competition Commission and G Liviero & Son Building (Pty) Ltd as an order of the Tribunal, as annexed to the order and marked “A”.

As confirmed, the order reflected, among other terms, G Liviero’s admission of contraventions of section 4(1)(b)(iii) in relation to the Tamboti at Simbithi Estates and Nicol Apartments projects, the undertaking to cooperate with the Commission and to implement a competition compliance programme and related internal measures, and the obligation to pay an administrative penalty of R2 011 078 in three instalments on the dates specified in the consent agreement.

The Tribunal’s published order did not record any separate or additional order as to costs.

Cases Cited

No cases were cited in the Tribunal’s order or in the text of the annexed consent agreement.

Legislation Cited

Competition Act, 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.

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 references 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. 828 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 Tribunal’s order or in the text of the annexed consent agreement.

Held

The Tribunal held, in effect, that the consent agreement concluded between the Competition Commission and G Liviero & Son Building (Pty) Ltd should be confirmed as an order of the Tribunal.

The confirmed order embodied G Liviero’s admission that it had engaged in collusive tendering in contravention of section 4(1)(b)(iii) of the Competition Act in relation to two identified projects, and it imposed the agreed consequences, including an administrative penalty, cooperation obligations, and specified compliance-related undertakings.

LEGAL PRINCIPLES

The matter applied the statutory mechanism under the Competition Act by which the Competition Commission and a respondent firm may conclude a consent agreement in terms of section 49D, and the Competition Tribunal may confirm that agreement as an order in terms of section 58(1)(a)(iii) read with section 58(1)(b).

It proceeded on the principle that collusive tendering (bid-rigging), including conduct described as cover pricing and arrangements involving loser’s fees that distort the competitive tender process, constitutes a prohibited restrictive horizontal practice under section 4(1)(b)(iii) of the Competition Act.

It further reflected the framework for the imposition of an administrative penalty in respect of prohibited practices, with reference to sections 59(1)(a), 59(2), 59(3), and 59(4) of the Act and the Commission’s settlement invitation process, and the distinction drawn in the settlement process between prescribed and non-prescribed prohibited practices with reference to section 67 of the Act.

Competition Commission v G Liviero & Son Building (Pty) Ltd (016964) [2013] ZACT 67 (22 July 2013)