Brief Summary

Competition — Consent agreement — Confirmation of consent agreement between Competition Commission and Basil Read Holdings — Allegations of collusive tendering in construction industry — Basil Read admitting to contraventions of section 4(1)(b)(iii) of the Competition Act — Tribunal confirming consent agreement as an order — Settlement reached to promote transparency and competition in the market.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings were an application to the Competition Tribunal for confirmation of a consent agreement concluded between the Competition Commission and Basil Read Holdings Limited in terms of section 49D, read with section 53(1)(a)(iii) and section 58(1)(b) of the Competition Act 89 of 1998 (as amended). The Tribunal sat as a panel comprising N Manoim (Presiding Member), Y Carrim, and T Madima. The matter was heard on 18 July 2013 and decided on 22 July 2013.

The Competition Commission acted as the applicant, and Basil Read Holdings Limited (referred to in the consent agreement as Basil Read Holdings Limited / Basil Read Holdings (Pty) Ltd in the captioning) acted as the respondent. The consent agreement addressed alleged contraventions of section 4(1)(b)(iii) of the Act, namely collusive tendering (bid-rigging) in the construction industry.

The procedural history reflected in the consent agreement was that the Commission initiated complaints in February 2009 and September 2009 in terms of section 49B(1), arising from investigations into collusive conduct in construction projects (including 2010 FIFA World Cup-related stadium projects and other construction projects). Following these investigations and broader concerns about widespread collusion, the Commission issued an Invitation to Firms in the Construction Industry to Engage in Settlement on 1 February 2011, which created a settlement process linked to the Commission’s approach to construction cartel enforcement. Basil Read applied to engage in leniency and settlement under that process and concluded a consent agreement with the Commission in June 2013, which was then placed before the Tribunal for confirmation.

The general subject-matter of the dispute concerned restrictive horizontal practices in the construction industry, specifically collusive tendering arrangements (including cover pricing, tender allocation arrangements, and an arrangement involving a “losers’ fee”) relating to projects in the Civil Engineering sub-sector, as defined with reference to the CIDB Regulations referenced in the consent agreement.

2. Material Facts

The consent agreement recorded that the Commission had initiated two complaints in 2009 in terms of section 49B(1). The first (10 February 2009) concerned alleged prohibited practices relating to collusive conduct in the construction of stadiums for the 2010 FIFA Soccer World Cup and named several firms, including Basil Read. The second (1 September 2009) followed the receipt of applications for immunity under the Commission’s Corporate Leniency Policy (CLP) and concerned alleged contraventions of section 4(1)(b) involving price fixing, market allocation, and collusive tendering across a range of construction projects and firms.

The Commission’s investigations, together with other construction industry investigations, led it to believe there was widespread collusion in contravention of section 4(1)(b)(iii). In response, the Commission issued an Invitation (published on 1 February 2011) offering firms an opportunity to settle contraventions if they made truthful disclosure, cooperated, and agreed to pay an administrative penalty determined in accordance with the invitation’s framework.

In the settlement process described in the consent agreement, Basil Read applied for leniency and settlement in terms of the Invitation on 15 April 2012. It disclosed ten prohibited practices, of which eight were described as non-prescribed prohibited practices and two as prescribed prohibited practices. Basil Read was recorded as having been first to apply for two non-prescribed prohibited practices for conditional immunity under the CLP. The consent agreement further recorded that Basil Read was also implicated in one non-prescribed prohibited practice which it did not disclose, and that Basil Read agreed to settle that practice as well.

The consent agreement identified seven contraventions of section 4(1)(b)(iii) (collusive tendering) as the subject of settlement and confirmation, falling within the Civil Engineering sub-sector. These included six disclosed matters and one non-disclosed matter that Basil Read nevertheless agreed to settle.

The disclosed matters recorded in the consent agreement were, in substance, the following. First, in relation to the Bayhead Road Extension Khangela Bridge Project (Tender No. 1R-1010), Basil Read (in a joint venture with Stefanutti) agreed with Group Five (around September 2006) that Group Five would submit a cover price to ensure the Basil Read/Stefanutti joint venture won the tender, with an arrangement to share profits implemented through subcontracting to Group Five; the joint venture won the tender, and the project (for eThekwini Municipality in Durban) was completed in January 2010.

Second, in relation to Civil Works for the Tati Activox Project (Tender No. H324250-CC002 & CC004), Basil Read agreed with the Grinaker-LTA/Stefanutti joint venture (around 22 June 2007) to provide a cover price enabling that joint venture to win; the tender was awarded accordingly, for a project near Francistown in Botswana for Botswana Metal Refinery (Proprietary) Limited, completed in September 2008.

Third, in relation to N1 Section 16 Glen Lyon/Zandkraal (Tender No. NRAN001-156-2007/1), Basil Read agreed with WBHO and Raubex (around 2006/2007) that WBHO and Raubex would inflate their bid prices to enable Basil Read to win; the tender was awarded to Basil Read by SANRAL, and the project was completed in September 2009.

Fourth, in relation to N1 Section 15 and 16 Glen Lyon/Zandkraal (Tender No. N001-156-2007/1), Basil Read reached an agreement with WBHO and Raubex (around 2006/2007) that Basil Read and WBHO would inflate bid prices to enable Raubex to win; the tender was awarded to Raubex by SANRAL, and the project was completed on 15 November 2009.

Fifth, in relation to the R40 Barberton Reconstruction Project (Tender No. NRAN040-020-2006/1), Basil Read reached an agreement with WBHO and Raubex (around 2006/2007) that Basil Read and Raubex would inflate bid prices to enable WBHO to win; the tender was awarded to WBHO by SANRAL, and the project was completed on 10 June 2009.

Sixth, the consent agreement referred to a 2006 Road Contractors Meeting, at which Basil Read reached an agreement with Concor, Haw & Inglis, Grinaker LTA, and Raubex (around 2006) to allocate road tenders, with firms not allocated or not interested in winning a tender submitting cover bids to protect the designated bidder.

The non-disclosed matter settled in the consent agreement concerned the Berg River Dam (Tender No. TCTAB2020). Basil Read (in a joint venture with Ceccon (Pty) Limited and Oderbrecht (Pty) Ltd, referred to as the BCR Joint Venture) agreed (around 29 March 2004) with two other joint ventures that the winning joint venture would pay a “losers’ fee” to the losing joint ventures. The tender was awarded to the joint venture comprising Grinaker-LTA, Group Five, WBHO, and Western Cape Empowerment. The consent agreement recorded that no losers’ fee was paid, but nevertheless characterised the arrangement as collusive tendering. The project (construction of a dam at the Berg River for the Trans Caledon Channel Authority) was completed on 19 September 2009.

The consent agreement contained an express admission by Basil Read that it entered into the above agreements with competitors in contravention of section 4(1)(b)(iii). It also recorded Basil Read’s cooperation, including truthful disclosure, expeditious cooperation, undertakings to cease and not to engage in prohibited practices, and confirmations regarding non-destruction of evidence and the absence of misrepresentation.

As to remedy and forward-looking obligations, Basil Read undertook to develop and implement a competition law compliance programme and to circulate an internal statement summarising the consent agreement to management and operational staff within specified time periods after Tribunal confirmation. It also undertook to cooperate with the Commission in any subsequent proceedings, including making employees and former employees available to testify.

On penalty, the consent agreement recorded that, having regard to sections 58(1)(a)(iii), 59(1)(a), 59(2), and 59(3) (as referenced), Basil Read agreed to pay an administrative penalty of R94 936 248, calculated in accordance with the Invitation, by reference to turnover in the relevant sub-sector and exports for the financial year preceding the invitation.

The payment terms were included in the agreement and then modified by an addendum. The addendum substituted the timing of the second instalment, recording payment in two instalments of R47 468 124 each, with the first within 30 days of the Tribunal’s order and the second payable on the anniversary of the first payment.

Where the consent agreement described particular conduct and arrangements, those facts were presented as agreed and admitted; the Tribunal’s order, as issued, did not record factual disputes or resolve contested evidence, but rather confirmed the agreement as presented.

3. Legal Issues

The central legal question before the Tribunal, as reflected by the order and the nature of the application, was whether the Tribunal should confirm the consent agreement concluded between the Commission and Basil Read as an order of the Tribunal under the statutory framework referenced in the documents, particularly section 49D read with section 58(1)(b) of the Competition Act.

The dispute, as placed before the Tribunal, did not present a contested determination of fact on the merits of the prohibited practices. Instead, the matter concerned the application of the Act’s settlement and consent-order mechanisms to the agreed facts and admissions recorded in the consent agreement, together with the Tribunal’s confirmatory function. In that sense, the issue was primarily procedural and legal, focusing on the statutory basis for confirmation and the relief to be made an order, rather than a value judgment on contested conduct.

To the extent that the consent agreement itself articulated the underlying contraventions, the relevant legal characterisation was that the admitted conduct constituted collusive tendering prohibited by section 4(1)(b)(iii), with an associated administrative penalty contemplated by the Act’s penalty provisions referenced in the agreement.

4. Court’s Reasoning

The Tribunal’s reasoning, as contained in the issued decision, was expressed in a brief confirmatory form. The Tribunal stated that it confirmed the order as agreed to and proposed by the Competition Commission and the respondent, annexed as “A” and the addendum marked “B”. The decision therefore reflected the Tribunal’s exercise of its statutory power to make the consent agreement an order of the Tribunal, rather than an extended analysis of the underlying contraventions.

The consent agreement itself set out the legal framework that informed the requested order. It recorded that the Commission is empowered to investigate alleged contraventions, to conclude consent agreements under section 49D, and to seek confirmation as an order under section 58(1)(b). It also set out the statutory prohibition in section 4(1)(b)(iii) and described the conduct as collusive tendering (including cover pricing and tender allocation), identifying this as conduct that distorts tender outcomes and undermines the objects of the Act.

The consent agreement further linked the settlement process to transparency and efficiency considerations and referenced public procurement principles in section 217 of the Constitution. Within that framework, the agreed relief included not only a penalty but also behavioural commitments such as future cooperation and compliance measures. The Tribunal’s confirmation gave binding effect to those agreed terms as an order, in the form presented to it by the parties.

No additional evaluative weighing of evidence or independent recalculation of penalty was recorded in the Tribunal’s decision itself. The confirmatory order accordingly reflected acceptance of the settlement structure established by the Act and implemented through the Commission’s invitation-driven process, as embodied in the consent agreement and addendum placed before the Tribunal.

5. Outcome and Relief

The Tribunal confirmed the consent agreement concluded between the Competition Commission and Basil Read as an order of the Competition Tribunal, including the attached addendum governing payment terms.

As confirmed, the order gave effect to Basil Read’s admission of contraventions of section 4(1)(b)(iii) in relation to the specified projects and the 2006 road contractors meeting, and to the agreed remedial measures. The confirmed terms included payment of an administrative penalty of R94 936 248, payable in two instalments of R47 468 124 each, with the first due within 30 days of the Tribunal’s order and the second due on the anniversary of the first payment (as per the addendum). The agreement further included obligations concerning cooperation with the Commission, the development and submission of a competition law compliance programme, and internal communication of the settlement terms.

The Tribunal’s order, as issued in the text provided, did not record any separate costs order.

Cases Cited

No cases were cited in the text of the judgment and annexed consent agreement provided.

Legislation Cited

Competition Act 89 of 1998 (as amended), including section 4(1)(b)(iii), section 19, section 21(1), section 22, section 26, section 49B(1), section 49D, section 53(1)(a)(iii), section 58(1)(a)(iii), section 58(1)(b), section 59(1)(a), section 59(2), section 59(3), section 59(4), and section 67.

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

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

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

Rules of Court Cited

No rules of court were cited in the text provided.

Held

The Tribunal made an order confirming, in full, the consent agreement and its addendum concluded between the Competition Commission and Basil Read, thereby rendering the agreed settlement terms binding as an order of the Competition Tribunal.

The confirmed order gave effect to Basil Read’s admission of having engaged in collusive tendering prohibited by section 4(1)(b)(iii) in relation to the specified civil engineering tenders and meeting conduct, and to the settlement terms requiring payment of an administrative penalty and implementation of compliance and cooperation obligations.

LEGAL PRINCIPLES

The matter applied the statutory mechanism under the Competition Act 89 of 1998 by which the Competition Commission may conclude a consent agreement with a respondent firm in relation to alleged contraventions of the Act and may apply to the Competition Tribunal for confirmation of that agreement as a Tribunal order under section 49D, read with the Tribunal’s powers under section 58.

The consent agreement proceeded on the principle that collusive tendering (bid-rigging) constitutes a per se prohibited restrictive horizontal practice under section 4(1)(b)(iii), and that settlement may include both an administrative penalty (calculated with reference to turnover in the relevant sub-sector as described in the settlement invitation framework and grounded in the Act’s penalty provisions referenced) and behavioural undertakings directed at future compliance and cooperation.

The Tribunal’s order reflected the principle that, where the Commission and a respondent place an agreed consent agreement before the Tribunal for confirmation in terms of the Act, the Tribunal may confirm that agreement as an order, thereby giving enforceable effect to the agreed admissions, penalty obligations, and forward-looking compliance commitments contained in the settlement instruments.

Competition Commission v Basil Read Holdings (Pty) Ltd (016949) [2013] ZACT 69 (22 July 2013)