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[2013] ZACT 72
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Competition Commission v Tubular Technical Construction (Pty) Ltd (017046) [2013] ZACT 72 (22 July 2013)
COMPETITION
TRIBUNAL
REPUBLIC
OF SOUTH AFRICA
Case
No: 017046
In
the matter between:
The
Competition Commission Applicant
and
Tubular
Technical Construction (Pty) Ltd Respondent
Panel:
N
Manoim (Presiding Member), Y Carrim
(Tribunal
Member) and T Madima (Tribunal
Member)
Heard
on:
18
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”.
Presiding
Member N Manoim
Concurring:
Y
C
arrim
and
T
Madima
IN
THE
COMPETITION
TRIBUNAL
OF SOUTH AFRICA
HELD
IN
PRETORIA
CT
Case No:
CC
Case No: 2OO9Feb4279/2O09Sep4S41
Application
for confirmation of a consent agreement
In
the matter between:
THE
COMPETITION COMMISSION
Applicant
and
TUBULAR
TECHNICAL CONSTRUCTION (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 TUBULAR TECHNICAL CONSTRUCTION (PTY) LTD, IN REGARD TO
CONTRAVENTIONS OF SECTION
4(1)(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 on contraventions of the
Competition
Act 1998
;
WHEAREAS
Tubular
Technical
Construction
(Pty)
Ltd
(“Tubular*)
has
accepted the invitation and has agreed to
settle
in
accordance
with
the
terms of the Invitation;
NOW
THEREFORE the
Competition
Commission
and Tubular
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, unless the context indicates
otherwise,
the
following
definitions
shall apply;
1
.
1.
“Act"
means
the
Competition
Act,
1998 (Act No,
89.
of
1
998),
as
amended;
1.2.
“CFTP”
means
the
Construction
“Fast
Track
Process 'announced
by
the
Commission
on 1 February 2011
to
fast
track
the settlement
process
and to:
resolve
the
Commission’s
investigations
into
the
construction
industry;
1.3.
“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
Floor,
Mulayo Building (Block
C),
the
dti Campus, 77
Meintjies
Street
Sunnyside, Pretoria, Gauteng;
1.5.
“Commissioner” means the Commissioner of the Competition
Commission,
appointed
in terms of section
22
of
the
Act;
1.6.
“Complaints" means the complaints
initiated
by
the
Commissioner
of
the
Competition Commission in terms
of
section
49B
of
the Act
under
case
numbers
2009Feb4279
and 2009Sep4641;
1.7.
"Consent Agreement” means this agreement
duly
signed
and
concluded between the Commission and Tubular;
1.8..
'‘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
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,
1.9.
"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;
1.10.
"Parties” means the Commission and
Tubular;
1.11.
“prescribed prohibited
practices'*
refers
to prohibited
restrictive
horizontal
practices
relating
to
t
h
e
constru
ction
in
dustry
that
are
contemplated in secti
on
4(1)(b)
of
the
Act
and
that ceased after 30 November 1993, but
more
than
three
years
before the
complaints
were
Initiated;
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.
“Respondent” means Tubular;
1.14.
“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 proced
ures
detailed
therei
n
.
1.1.5.
“Subsector" refers to the
classes
of
construction work defined In Schedule 3 of the CID3
Regulations,
substituted
by Government Notice No, 8986 of 14 November 2008, published in
Government Gazette No. 31603 of 14 November 2
008;
and,
1.6.
“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 3
rd
Floor,
Mulayo building (Block C), the dti Campus, 77 Meintjies
Street,
Sunnyside,
Pretoria,
Gauteng.
1.17
“Tubular”
means
Tubular
Technical
Construction
(Pty)
Ltd, a
company
dufy
incorporated
under
the
laws
of the Republic
of
South
Africa with Its principal
place
of business at 0 Hawley Road, Bedfordview,
2.
The
Complaints
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 Murray & Roberts
Limited, Grinaker-LTA
Ltd,
the
construction
operating business unit of Aveng (Africa) Limited, Group Five
Limited, Basil Read (Pty) Ltd, WBHO Construction (Pty)
Ltd, ,
Stefanutti Stocks Limited, Interbeton Abu Dhabi nv He, and Bouygues
Construction SA.
2.2.
On 01 September
2009,
following
the receipt of applications for immunity in terms of the CLP, the
Commission initiated the Complaint in terms of section
49B(1) of the
Act Into prohibited practices relating
to
collusion
in the
construction
Industry.
The Complaint concerned
alleged
contraventions
of
section
4(1)(b)
of the Act as regards
collusive
tendering,
price fixing
and
market
allocation
in
respect to tenders. The investigation was Initiated against the
following
firms:
Murray
& Roberts,
Grinaker
LTA
Ltd, Aveng
(Africa)
Ltd,
Stefanutti
Stocks
Holdings
Ltd,
Group Five Ltd, Concor Ltd, G. Liviero & Son
Building
(Pty)
Ltd,
Gluricich Coastal
Projects
(Pty)
Ltd,
Hochtief
Construction
AG,
Dura Solstanche- Bachy (Pty) Ltd, Nishimatsu Construction Co Ltd,
Esorfranki Ltd, VNA Pilings CC, Rodio Geotechnics (Pty) Ltd,
Diabor
Ltd, Gauteng Piling (Pty) Ltd, Fairbrother Geotechnlcal CC
Geamechanlcs
CC,
Wilson Bayfy
Holmes-0vcon
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
other 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 prohibited
(1)
An agreement between, or concerted practice by 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 m 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 ft outweighs that
effect;
or
(b)
it involves anv of the following restrictive horizontal practices:
(i)
directly or indirectly fixing a purchase or selling price or any
o
ther
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
regarding 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
of
the
Republic
of South
Africa,
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, disrupting cartels
and
Incentivising
competitive behavior
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
form of bid-rigging of projects 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 the
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 sets out the details of the non-prescribed prohibited
practices
only,
which
the
respondent
is
liable
to
settle regard being had to
the
provisions
of section
67(2)
of
the Act and the penalty is
calculated
taking
into
account only the
said
non-prescribed prohibited practices.
3.9.
Applying
firms
were
required to
fntoralia
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 15
April
2011.
4.
Application by Tubular”
4.1.
Tubular
applied
for
leniency
and
Settlement
In
terms
of
the
Invitation.
Tubular
is
active
in
the medium to heavy
mining,
industrial
and
petrochemical
construction
industries
both
locally
and
Internationally. It provides services In structural steelwork,
plate
work,
piping,
fabrication, enaction, electrical and instrumentation, installation
of mechanical
equipment,
planning,
management
and
execution of turnkey projects, '
4.2.
Tubular applied
for
leniency
and Settlement and disclosed 2 prohibited practices
(2
projects).
One of the projects is
a
prescribed
prohibited practice,
and
the
remaining
non-prescribed
prohibited
practice
falls
in
the
Mechanical
Engineering
sub-sector.
4.3.
Tubular was not the 'first to apply for the remaining project, and Is
therefore settling It In terms of this Consent Agreement,
4.4.
The
prohibited
practice
or
contravention
by
Tubular
of
section
4(1)(b)(iii)
of
the
Act
which is the subject of this Consent Agreement, is
set
out
below.
5.
Disclosed Project
Relocation
of the in~pit Crusher for Sisheti Mine
Tubular
reached agreement with Group
Five
on
or
about
March
2009
in
respect
of
this
project.
In terms of the agreement Tubular and Group
Five
exchanged
a
budget
price (n
relation
to this project. The budget price exchange was in
anticipation
of
a tender being issued by the client, and was in
the
context
of a tendering process. This conduct constitutes
cover
pricing
and
Is
collusive
tendering In contravention
of
section
4(1)(b)(iii)
of
the Act,
The
project
was for the dismantling and installation of in-pit primary crushing
plant
and
incline
conveyor
at the Sishen mine for Kumba iron
Ore.
The
project
never
commenced.
6.
Admission
Tubular
admits
that
it was involved in collusive conduct In
contravention
of
section 4(1)(b)(iii) of the Act in
that
it
tendered collusively in respect of the prohibited practice mentioned
in paragraph 5 above.
7.
Co-operation
In
so
far
as
the Commission is aware, and in compliance with the requirements as
set out In the Invitation, Tubular:
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
cornceming
the prohibited practice
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, Tubular
agrees
and
undertakes to provide the Commission
with
full
and expeditious co-operation from the
time
that
this
Consent
Agreement
Is
concluded until the subsequent proceedings
in
the
Competition 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.
Tubular
will
avail
its employees and former
employees
to
testify
as
witnesses for the Commission in any
cases
regarding
the contraventions contained in this Consent
Agreement;
8.1.3.
Tubular
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
8:2
Tubular 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
mechanisms
for the
monitoring
and
detection
of any contravention of the
8.3.
Tubular 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.
8.4.
Tubular shall circulate a statement summarising the contents- of this
Consent Agreement to
all
management
and
operational staff
employed
at
Tubular
within 60
days
from
the date of confirmation
of
this
Consent
Agreement
by the Tribunal.
8.5.
Tubular 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, Tubular 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
Tubular
In the relevant subsector in the Republic
and
Its
exports from the
Republic
for
the
financial year preceding the
date
of
the i invitation.
9.3.
The project which Tubular has
been
found
to have contravened the Act, falls under the Mechanical Engineering
CIDB subsector.
9.4.
Accordingly, Tubular is liable
for
and
has
agreed
to pay an
administrative
penalty in the sum of
R2
634
G67
(Two Million, Six Hundred and Thirty
Four
Thousand, Six Hundred and Sixty Seven Rand) which
penalty
Is
calculated In accordance
with
the invitation .
10.
Terms
of payment
10.1.
Tubular
will
pay
the
amount
set out above [In paragraph 9.4] to the Commission
in
three payments, the first payment of R 878 000 within 30 days from
the date of confirmation of this Consent agreement by the
Tribunal.
Tubular will make the second payment of R 878 000
r
exactly one year after the first payment. Tubular will make the third
payment of R 878 667, exactly one year after the second payment.
10.2.
This payment
shall
be
made into the Commission's bank account, details of which are as
follows:
Bank
name:
Absa
Bank
Branch
name: Pretoria
Account
holder: Competition Commission Fees Account
Account
number: 4050778576
Account
type: Current Account
Brach
Code: 323 5
10.3.
The penalty
will
be
paid over by the
Commission
to
the
National
Revenue
Fund in accordance with
section
58(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 paragraph
5
above, and upon confirmation as an order by the Tribunal, concludes
all proceedings between the Commission and Tubular in respect
of this
conduct only.
Dated
and signed at BEDFORDVIEW on the 18
th
day of JUNE
2013.
For
Tubular
[FILL
IN NAME AND
POSITION
OF
PERSON THAT IS SIGNING]
Dated
and signed at PRETORIA on the 21
st
day of JUNE
2013.
For
the
Commission
Shan
Rarriburuth
(Commissioner)