Brief Summary

Competition Law — Consent Agreement — Collusive tendering — Competition Commission initiating complaint against Hochtief Construction AG for contraventions of the Competition Act — Hochtief admitting to engaging in collusive tendering practices regarding a tender for the Berg River Dam project — Consent agreement confirmed by the Tribunal, imposing penalties for the admitted contraventions.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings were an application for confirmation of a consent agreement as an order of the Competition Tribunal, brought in terms of section 49D read with sections 58(1)(a)(iii) and 58(1)(b) of the Competition Act 89 of 1998.

The parties were the Competition Commission as applicant and Hochtief (identified in the Tribunal heading as Hochtief Construction AG, and in the consent agreement as HOCHTIEF Solutions AG) as respondent. The matter was heard by a panel comprising N Manoim (Presiding Member), Y Carrim (Tribunal Member), and T Madima (Tribunal Member).

The procedural history reflected in the consent agreement was that the Commission initiated construction-industry complaints in February 2009 and September 2009 under section 49B. Following the Commission’s subsequent invitation to firms in the construction industry to engage in settlement (published on 1 February 2011), Hochtief applied for settlement on 15 April 2011. A consent agreement was concluded and then placed before the Tribunal for confirmation. The Tribunal heard the matter on 18 July 2013 and issued its decision on 22 July 2013, confirming the consent agreement as an order.

The dispute concerned alleged restrictive horizontal practices in the construction industry, specifically collusive tendering (bid-rigging) in contravention of section 4(1)(b)(iii) of the Act, and the appropriate settlement terms including an administrative penalty and compliance-related undertakings.

2. Material Facts

The Commission had initiated investigations into alleged collusive conduct in the construction industry. One complaint (initiated on 10 February 2009) concerned alleged prohibited practices relating to collusive conduct in the construction of stadiums for the 2010 FIFA Soccer World Cup, involving multiple firms. A further complaint (initiated on 1 September 2009) followed applications for immunity under the Commission’s Corporate Leniency Policy and concerned alleged contraventions of section 4(1)(b) of the Act (including price fixing, market allocation, and collusive tendering) across construction projects, again involving numerous firms including Hochtief Construction AG.

In response to what it described as widespread collusion in the industry, the Commission published an invitation to settle contraventions relating to collusive tendering. Hochtief applied by the closing date (15 April 2011) and disclosed three prohibited practices, of which one was a prescribed prohibited practice, and two were non-prescribed prohibited practices. The consent agreement recorded that one of the two non-prescribed prohibited practices related to an ongoing case that the Commission had already investigated and decided to refer to the Tribunal, and that this was not included in the consent agreement. On the Commission’s understanding (as recorded), Hochtief was not implicated in any projects that it did not disclose.

The consent agreement therefore concerned one disclosed project: the Berg River Dam (Tender No: TCTAB020). The material facts recorded were that, during or about 2004, Hochtief (in a joint venture with Concor, described as the Hochtief–Concor Joint Venture) reached an agreement with other tenderers (including a joint venture described as the BRP Joint Venture and the Basil Read, Ceccon, Oiderbrecht Joint Venture) concerning a “loser’s fee” arrangement. The arrangement was that if a particular joint venture were to win the tender, a loser’s fee would be payable to the unsuccessful tenderers. The consent agreement characterised this as collusive tendering in contravention of section 4(1)(b)(iii) of the Act. The project was the construction of a dam at the Berg River for the Trans Caledon Tunnel Authority, and it was completed on 19 September 2009.

Hochtief admitted that it entered into the agreement described in relation to the Berg River Dam project, and admitted that this conduct contravened section 4(1)(b)(iii). It further provided undertakings (as recorded) relating to cooperation, cessation of prohibited conduct, and implementation and monitoring of a competition law compliance programme, including submission of that programme to the Commission and internal circulation of a statement summarising the consent agreement.

The parties agreed an administrative penalty of R 1 315 719 (one million three hundred and fifteen thousand seven hundred and nineteen rand), calculated in accordance with the Commission’s invitation methodology with reference to Hochtief’s turnover in the relevant CIDB sub-sector (recorded as the Civil Engineering sub-sector). Payment was to be made within 30 days of confirmation of the consent agreement as a Tribunal order, into the Commission’s specified bank account, and the consent agreement recorded that the penalty would be paid over to the National Revenue Fund in accordance with section 59(4) of the Act.

3. Legal Issues

The central legal question before the Tribunal was whether it should confirm the consent agreement concluded between the Competition Commission and Hochtief as an order of the Tribunal, under the empowering provisions relied upon in the agreement, namely section 49D read with sections 58(1)(a)(iii) and 58(1)(b) of the Competition Act.

Embedded in the consent agreement (and forming the basis for the relief sought) was the characterisation of the disclosed conduct as a contravention of section 4(1)(b)(iii), which prohibits collusive tendering between parties in a horizontal relationship. However, the matter before the Tribunal in these proceedings was not presented as a contested determination of liability on evidence, but as an application to confirm an agreed settlement in which the respondent admitted the contravention.

The dispute presented to the Tribunal was therefore predominantly an application of law to agreed facts within a statutory settlement framework, together with the exercise of the Tribunal’s statutory function to make a consent agreement an enforceable order, rather than a fact-finding dispute or a contested value judgment on the merits of liability.

4. Court’s Reasoning

The Tribunal’s published decision was confined to a brief order. It recorded that it confirmed the order as agreed to and proposed by the Competition Commission and the respondent, annexed to the order and marked “A”. The confirmation reflects the Tribunal’s acceptance that it had the statutory power to confirm a consent agreement concluded under section 49D, and to issue an order in terms of section 58(1)(a)(iii) read with section 58(1)(b).

The consent agreement itself set out the statutory framework relied upon by the parties. It identified the Commission’s investigative and settlement powers, the prohibition in section 4(1)(b)(iii) against collusive tendering, and the settlement mechanism created by the Commission’s industry invitation. It also described the nature of collusive tendering in the context of tender processes, including the distortion of competitive outcomes through arrangements such as cover pricing and, in Hochtief’s disclosed project, a loser’s fee arrangement.

As the Tribunal’s order merely confirmed the settlement as presented, the reasoning discernible from the decision is that the Tribunal treated the parties’ concluded consent agreement—containing an admission of contravention, agreed penalty, and future-conduct undertakings—as suitable for confirmation and enforcement through a Tribunal order, in accordance with the relevant statutory provisions.

5. Outcome and Relief

The Tribunal confirmed the consent agreement between the Competition Commission and Hochtief as an order of the Tribunal.

The confirmed order (as reflected in the consent agreement) provided for, among other things, Hochtief’s payment of an administrative penalty of R 1 315 719 within 30 days of confirmation, and various undertakings relating to cooperation and competition-law compliance measures, including submission of a compliance programme and circulation of a summary statement to management and operational staff within 60 days of confirmation.

The Tribunal’s short order did not record a separate or additional costs order.

Cases Cited

No case law was cited in the Tribunal’s published order or in the text of the consent agreement provided.

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, and the substitution referenced by Government Notice No. 898 of 14 November 2008, published in Government Gazette No. 31603 of 14 November 2008.

Rules of Court Cited

No rules of court were cited in the Tribunal’s published order or in the text of the consent agreement provided.

Held

The Competition Tribunal held, by confirming the parties’ agreed terms, that the consent agreement concluded between the Competition Commission and Hochtief would stand as a Tribunal order. The confirmed order encompassed Hochtief’s admission of collusive tendering in relation to the Berg River Dam tender through a loser’s fee arrangement, the obligation to pay an agreed administrative penalty, and undertakings directed at future compliance and cooperation.

LEGAL PRINCIPLES

A consent agreement concluded between the Competition Commission and a respondent in terms of section 49D of the Competition Act may be placed before the Competition Tribunal for confirmation as an order, and upon confirmation it becomes enforceable as an order of the Tribunal in terms of section 58.

Collusive tendering constitutes a prohibited restrictive horizontal practice under section 4(1)(b)(iii) of the Competition Act. The consent agreement treated a loser’s fee arrangement among competing tenderers (or tendering joint ventures) as a form of collusive tendering that distorts tender outcomes and is prohibited.

In the settlement framework employed, an administrative penalty may be agreed with reference to the Act’s penalty provisions (including section 59) and the Commission’s published settlement methodology, and payment is to be made to the Commission for transfer to the National Revenue Fund in accordance with section 59(4).

A confirmed consent agreement may incorporate forward-looking undertakings addressing cessation of prohibited conduct, ongoing cooperation with the Commission in related proceedings, and implementation and reporting of a competition law compliance programme, reflecting the settlement’s role in both resolving past conduct and reducing the risk of recurrence.

Competition Commission v Hochtief Construction AG (016998) [2013] ZACT 70 (22 July 2013)