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[2013] ZACT 73
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Competition Commission v Vlaming (Pty) Ltd (017053) [2013] ZACT 73 (22 July 2013)

COMPETITION
TRIBUNAL
REPUBLIC
OF SOUTH AFRICA
Case
No:
017053
In
the matter between:
The
Competition Commission Applicant
and
Vlaming
(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 Carrim and T Madima
IN
THE COMPETITION TRIBUNAL OF SOUTH AFRICA
HELD
IN PRETORIA
CT
Case No.
CC
Case No.:2009Feb2479/2008Sep4647
In
the matter between:
THE
COMPETITION
COMMISSION Applicant
and
VLAMING
(PTY) LTD
Respondent
CONSENT
AGREEMENT
IN
TERMS
OF
SECTION
49D READ WITH
SECTION
58(1)(a)(1)(III)
AS
READ WITH
SECTION
68(1)
OF
TOE COMPETITION ACT,
1998
(ACT
NO.89 OF
1998),
AS
AMENDED,
BETWEEN
THE
COMPETITION
COMMISSION
AND VLAMING
(PTY)
LTD (“VLAMING”), 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 Compaction Act, 1998;
WHEREAS
the Competition
Commission
is
am powered
to,
inter
aila,
conclude
consent
agreement 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, 1993;
WHEREAS
Vlaming (Pty) Ltd has accepted this invitation and has agreed to
settle In accordance with the terms of the Invitation;
NOW
THEREFORE the Competition Commission
and
Vlaming
(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)(1)(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, 1990 (Ad No. 88 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);
1.5.
“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* 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.
“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 20009Sep4641;
1.8.
“Consent
Agreement"
means
this agreement duly signed and concluded batwaen
the
Commission and
Viaming
(Pty)
Ltd
(“Viaming”);
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
wsh
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 frm 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.
“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;
1.11.
“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;
1.12.
“Parties” means the Commission and Vlaming;
1.13.
"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;
1.1.4.
“Respondent" means
Vlaming;
1.15.
“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
pr
o
cedu
r
es
detailed
therein;
1.16.
“Sub sectors 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;
1.17.
“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,
Mulayo
bunding
(Block
C),
the
dti
Campus,
77
MeintJIe®
Street,
Sunnyside,
Pretoria, Gauteng; and
1.18.
"Vlaming"
means
Vlaming
(Pty
)
Ltd.
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
agsinst
Grinaker-
LTA
(the
construction
operating
business
unit
of
Aveng),
Group
Five Limited, Basil
Read
(Pty) Ltd,
WBHO
Construction
(Pty) Ltd, Murray & Roberta Limited,
Stefan
utti
Stocks
Limited,
Interbeton Abu Dhabi nv
plc
and
Bouygues Construction SA.
2.2.
In addition,
on
01
September 2009, following foe receipt of
applications
for
immunity
in
terms of
the
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
feted
belowrThe
complaint
concerned
alleged contraventions
□f
s©Gtion'4{T)(b) "of the Act es'regards
price
fixing' market
allocation
and
collusive
tendering.
The investigation was initiated against the following
firms:
Grinaker-LTA,
Aveng
(Africa)
Ltd,
Stsfanutli
Stocks
Holdings
Ltd,
Group Five
Ltd,
Murray &
Roberts,’
Concor
Ltd, G. LJviero
&
Son Building
(Pty)
Ltd,
Glarideh
Coastal
Pmjects
(Pty)
Ltd, Hochtief Construction AG, Dura Soletanche-Bachy (Pty)
Ltd,
Nishimatsu
Construction
Co Ltd, Esorfranki Ltd, VNA
Pilings
CC,
Rodio
Geotechnics
(Pty) Ltd, Diebor Ltd, Gauteng Filing (Pty) Ltd, Falrbrother
Geotechnlcal CC, Geomechanics
CC
Wilson Bayly Holmes-Oyc
on
Lt
d
and other construction firms
,
in
clu
di
n
g
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 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 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 am of the following restrictive horizontal practices:
(i)
directly or indirectly fixing a purchase or selling price or any
other trading condition;
(ii)
diving markets by allocating customer, 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 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 we§ 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
Wd
that is not intended
to
win
the
contract. The agreement is reached in
such
a way that among
the
colluding firms one firm wishes 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 agreement 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 promote
consumers
with
competitve
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
conclude
consent agreements
in
terms
of
section 49D for
confirmation
as
an
order
of the Competition Tribunal in terms
0
f
section 58(1)(b) of the Act.
3.6.
Therefore, in the interest of transparency, efficiency, disrupting
cartels and Incentivlslng competitive
behaviour
In
the
construction
tndustry
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 th a terms set out in the Invrtsiion.
3.7.
On
1
February
2011
the Commission Issued
a
media release
about
the Invitation and
ptifeffshed
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 applicatio
n
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 paragraph 19-28
of
the
invitation;
and
3.7.3.
comply with the requirements of the
Settlement
as
set
out
in PART 1 and
PART
3 of the Invitation.
3.8.
This agreement sets out the
details
of
the
non-prescfibed
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
rson-presonbed
prohibited
practices.
3.9.
Applying firms were
required
to
inter
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 re
quest
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.
Applications by Vlaming
4.1.
Vlaming
applied
for
leniency
and
Settlement
in
terms
of the
Invitation
.
Viaming
is
a construction company undertaking construction and development
work
in
residential townhouse market as well as commercial construction
projects.
4.2.
Vlaming applied on
14
April 201
1
and disclosed seven (7) prohibited practises. Two
(2)
of
these are
prescribed
prohibited
practices
and five (5) are non-proscribed ' prohibited practices.
4.3.
Out of the
five
(5)
non-prescribed
prohibited
practices,
Vlaming is first to apply in
respect
of
three
(3)
non-prescribed
prohibited practices for
Conditional
immunity
in
terms of the CLP.
4.4.
In respect of the
two
(2) (I.e.
5
lass 3) non-prescribed prohibited practices
where
Vlaming
is
not first
to
apply,
these non-proscribed prohibited practices are
in
the
Genera!
Building
subsector.
4.5.
Furth
ermore
Viaming is
implicated
in
one (1) non prescribed prohibited
practice
which
it
did
not
disclose,
Vlaming
has agreed to
settle
it
4.6.
The
three
(3)
prohibited
practices
or contraventions by
Vlaming
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.
The Millwood Village Residential Project (Tender
no.NPK0366PBC)
Vlaming
reached separate agreements
with
Rainbow
Construction,
Gluridch
Bros
Construction (“Giuricich Bros") and Group Five,
respectively, on
or
about
August
2005,
In
respect
of the
Millwood
Viltago
Residential
project,
in
that - - :
Vlaming
agreed
to
provide
a
cover price to
Rainbow
Construction to enable Viaming
to
win
the
tender,
Vlaming
and
Rainbow
Construction
further
agreed to
add
on a
losers
fee
which was going to be
paid
to
Rainbow
Construction
should Vlaming win the tender.
Vlaming
agreed to provide a cover
pries
to
Guirich
Bros
to enable
Viaming
to
win
the tender.
Vlaming
agreed
with Group Five to add on losers' fee on their individual bid prices
to be paid
by
either of them who won the tender to the losers.
The
above conduct Is collusive tendering in contravention of section
4(1)(b)(iii) of the Act
The
project
was
for
the
construction
of
residential
blocks at the Millwood Village in Bryanston. The client for the
project was
Finishing
Touch
Trading 55 (Pty)
Ltd
and
the value of the project was R94 476
136,00.
The
tender was
awarded
to
Group Five and the project was completed on 22 July 2007.
5.2.
The Nicol Apartments
Project
(Tender
no,
BJ1139)
Vlaming
reached an agreement with
G
Liviero
& Son Building
(“G
LMero’),
Stefenutti
Stocks
Holding Limited ("Stafanuttf) and
Gluricich
Bros,
on
or about November 2006
in
respect
of
the
Nicol
Apartments project, In that Viaming agreed to give the above
firms
cover
prices
to
enable
Warning
to win
the
tender.
Further,
G
Liviero
and Giuricich Bros requested payment of R100 000. 00 and R50 000.00
respectively
from
Vlaming
to
cover their costs
of
tendering
for this project This conduct
Is
collusive
tendering
in
contravention
of
section
4(1)(b)(iii)
of
the
Act
The
project
was
for
the
construction
of
a
high-rise
building
comprising
of
90 residential apartments. The client for this project
was
Precoated
Metals.
The
tender
was
awarded
to
Vlaming
and
the project was completed on 3 October 2008.
6.
Non-Disclosed Projects
Kempton
City Mall
Vlaming
reached
an agreement with Giuricich Bros on
17
September
2GG8
in
respect
of the Kempton
City
Mall
project, in that
Vlaming
agreed
to give a cover price to Giuricich
Bros
as
Guirtcich
Bros ,was
not
interested in winning
the
tender. This
conduct
is
collusive tendering
in
contravention
of
section
4(1)(b)(III)
of
the
Act,
The
project was
for
the
construction of a
new
complex
comprising
of
flats
and
shops
in
Kempton
Park.
The
client for the project was Gardtell
Properties
(Pty)
Ltd,
trading
as
City
Property (Pty)
Ltd.
The
tender
was
awarded
to
Trystar
and
the project was
completed
on
31
July
2010.
7.
Admission
Vlaming
admits that it entered into the agreements
detailed
in
paragraphs
5.1
to 5.2 and 6 above with its
competitors
in
contravention
of section 4(1)(b)(iii) of the Act.
8. Co-operation
In
so
far as the Commission is aware, and
in
compliance with the requirements as set out in the Invitation,
Vlaming:
8.1.
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;
8,2.
has provided-full
and
expeditious co-operation to the Commission
concerning
the
prohibited practices;
8.3.
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;
8.4.
has
confirmed
that
it
has
not destroyed, falsified or concealed Information, evidence and
documents relating to the prohibited practices;
8.5.
has confirmed that it has not misrepresented or
made
a
witful or negligent
misrepresentation
concerning the material fads of any prohibited practice or otherwise
acted dishonestly.'
9.
Agreement Concerning Future Conduct
9.1.
In compliance with the requirements as set
out
in
the
Invitation,
Vlaming
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:
9.1.1.
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;
9.1.2.
Availing its employees to testify as witness for the Commission in
any cases
regarding
the
contraventions
contained in this Consent Agreement,
9.2.
Vlaming
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 Act
9.3.
Vlaming 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
9.4.
Vlaming shall
circulate
a statement summarising the contents
of
this
Consent
Agreement
to all management and operational staff employed at
Vlaming
within
60-days
from the date of confirmation of this consent Agreement by the
Tribunal,
9.5.
Vlaming
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.
'
10.
Administrative Penalty
10.1.
Having regard to the provisions
of
sections
58(1)(a)(i)
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,
Vlaming accepts that
It
is liable
to
pay
m
administrative
penalty (“penalty”).
10.2.
According to the invitation, the level of the penalty fs to be set on
the basis of a
percentage
of
the
annual
turnover of Vlaming In the relevant subsector In the Republic and Its
exports
from
the Republic for the financial
year
preceding
the date of the
Invitation.
10.3.
The
projects
in
respect
of
which
Vlaming has .been
found
to
have
contravened
the
Act,
fail
under
the
General
Building
subsector.
10.4.
Accordingly, Vlaming is liable for and has agreed
to
pay
an
administrative penally in
the
sum
of
R 3
421
662
(Three
Million
Four Hundred and Twenty One Thousand
Six
Hundred
and
Sixty
Jwo
Rand)
which
penalty
is calculated
m
accordance
with
the
Invitation.
11.
Terms of payment
11.1.
Vlaming shall pay the amount set out above in paragraph
10.4
to
the Commission
within
30
days
from
the
date
of
confirmation
of
this
Consent
Agreement
as
an
order
of
the Tribunal,
11.2.
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
345
11.2.
The
penalty
will
be
paid over by the Commission to the
National
Revenue
Fund
in
accordance
with section 59(4) of the Act
12.
Full and Final Settlement
This
agreement
is
entered
into
in full and final settlement of the
specific
conduct
listed
In
paragraphs
5.1-5.2 and 6.1 of this Consent Agreement and, upon confirmation as
an
order
by the Tribunal,
concludes
all
proceedings
between
the
Commission
and
Vlaming
in respect
of
this
conduct
only.
Dated
and signed JOHANNESBURG on the 29
th
day of APRIL 2013,
For
Vlaming
[FILL
IN
NAME AND
POSITION
OF
PERSON THAT IS SIGNING]
Dated
and signed PRETORIA on the 21
st
day of JUNE 2013,
For the commission
Shan Ramburuth
Commissioner