Brief Summary

Competition Law — Consent Agreement — Collusive tendering — Competition Commission initiating complaint against Aveng (Africa) Ltd for contraventions of section 4(1)(b)(iii) of the Competition Act — Aveng admitting to prohibited practices and agreeing to settle — Tribunal confirming consent agreement as an order — Agreement aimed at promoting competition and transparency in the construction industry.

Comprehensive Summary

Summary of Judgment

Introduction

These proceedings were an application to the Competition Tribunal for the confirmation of a consent agreement as a Tribunal order. The application was brought under section 49D, read with section 53(1)(a)(iii) and section 58(1)(b) of the Competition Act 89 of 1998 (as amended).

The parties were the Competition Commission (applicant) and Aveng (Africa) Ltd (respondent). The consent agreement related to conduct by Aveng’s operating business unit, Grinaker-LTA, in relation to alleged contraventions in the construction industry.

The procedural history reflected in the published text was that the Commission had initiated complaints in February 2009 and September 2009 into alleged collusive conduct in the construction industry. Following these investigations, 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). Aveng applied on 15 April 2011 for leniency/settlement in relation to conduct it disclosed. The consent agreement was signed on 16 May 2013 (Aveng) and 24 June 2013 (Commission), and was placed before the Tribunal for confirmation. The matter was heard on 17 July 2013 and decided on 23 July 2013.

The general subject-matter of the dispute concerned restrictive horizontal practices, specifically collusive tendering (bid-rigging) in the construction industry, including the use of cover pricing and related arrangements in multiple projects and meetings, and the appropriate resolution of that conduct by way of a consent agreement including an administrative penalty and compliance undertakings.

Material Facts

The material facts relied upon by the Tribunal, as reflected in the consent agreement and the order of confirmation, were not presented as contested facts. The published text records an agreed settlement and an express admission by Aveng of contraventions of the Act. No factual disputes requiring resolution by the Tribunal are recorded in the published text.

The Commission initiated a complaint on 10 February 2009 in terms of section 49B(1) into alleged prohibited practices relating to collusive conduct in the construction of stadiums for the 2010 FIFA Soccer World Cup, involving Grinaker-LTA and other named firms. On 1 September 2009, following receipt of applications for immunity under the Corporate Leniency Policy, the Commission initiated a further complaint under section 49B(1) into alleged contraventions of section 4(1)(b) (price fixing, market allocation, and collusive tendering) in relation to construction projects, involving Aveng and numerous other construction firms.

The Commission’s investigations led it to believe that there was widespread collusion in contravention of section 4(1)(b)(iii) in the construction industry. In response, the Commission published an industry-wide Invitation on 1 February 2011 to facilitate expedited settlement, transparency, and disruption of cartel conduct. The invitation required applying firms to make truthful and timely disclosures, cooperate fully, and agree to penalties calculated by reference to relevant turnover.

Aveng applied on 15 April 2011, disclosing 57 prohibited practices, of which 21 were described as prescribed prohibited practices and 36 as non-prescribed prohibited practices. The consent agreement addressed only the non-prescribed prohibited practices, with the penalty calculated on that basis, having regard to section 67 of the Act (as referenced in the agreement). The agreement recorded that Aveng was first to apply for conditional immunity in respect of 26 of the non-prescribed prohibited practices, while the consent agreement itself dealt with a set of 17 non-prescribed prohibited practices (comprising projects and meetings) which Aveng agreed to settle.

The consent agreement set out multiple instances of collusive tendering conduct, described as including cover pricing, tender allocation, and (in certain instances) loser’s fees and agreed tender mark-ups. The projects and arrangements identified in the agreement included, among others, the Braamhoek Quarry Dam tender, the SANRAL Mount Frere tender, the Tati Activox and Tati Nickel DMS projects (Botswana), Soccer City Stadium, the Sappi Amakhulu project, the Coega Office Block Development (including a 0.75% add-on and loser’s fee payments), the UCT Ladies Residence project (as part of a Western Cape arrangement referred to as the “Cape Club Meetings”), and the 2006 Road Contractors Meetings (tender allocation and cover bids).

In addition to disclosed projects, Aveng agreed to settle certain non-disclosed projects in which it was implicated but was unable to disclose. These included an alleged overarching agreement relating to allocation of tenders and cover prices for several 2010 FIFA World Cup stadia, together with an agreed target profit margin; as well as additional projects such as PPC Dwaaiboom expansion-related tenders, the Northern Waste Water Treatment Works contract, the Sishen in-pit crusher relocation contract (involving discussion of pricing proximity), the Durban ICC project (including a tender fee component as compensation to losing bidders), the New Board Factory at Ugie PG Bison project, and the PPRust North Expansion Infrastructure project.

Aveng expressly admitted that it entered into the agreements detailed in the consent agreement with competitors in contravention of section 4(1)(b)(iii) of the Act. It further undertook, as recorded in the agreement, that it had provided truthful disclosure and cooperation to the Commission, had ceased engaging in prohibited practices, had not destroyed or concealed relevant evidence, and had not misrepresented material facts.

For purposes of remedy, Aveng agreed to pay an administrative penalty of R306 576 143, calculated in accordance with the Commission’s Invitation, with reference to turnover in the relevant CIDB sub-sectors (Civil Engineering and General Building). The penalty was payable in three equal instalments of R102 192 047, with the first due on 1 July 2013 or within 30 days of confirmation (whichever was later), the second due by 1 July 2014, and the third due by 1 July 2015.

Aveng also undertook future-conduct commitments, including continued cooperation, implementation and monitoring of a competition law compliance programme (to be submitted to the Commission within 60 days of confirmation), and circulation of a statement summarising the consent agreement to management and operational staff within 60 days of confirmation.

Legal Issues

The central legal question before the Tribunal, as reflected in the published order, was whether the Tribunal should confirm the consent agreement as an order of the Tribunal in terms of section 49D, read with the Tribunal’s consent-order powers under section 58(1)(b) (as referenced in the agreement and the Tribunal order).

The dispute before the Tribunal was not framed as a contested adjudication on the merits of the prohibited practices. Rather, it concerned the application of the statutory settlement mechanism to agreed facts and admissions, and the Tribunal’s role in making an agreed consent agreement an enforceable order.

The determination was therefore primarily one of application of law to agreed facts (and, procedurally, the exercise of the Tribunal’s statutory power to confirm a consent agreement), rather than resolution of factual disputes or a broader value judgment on liability.

Court’s Reasoning

The published Tribunal decision consists of a short order confirming the consent agreement and its addendum. No extended reasoning is recorded in the published text beyond the confirmation itself.

What can be drawn from the text is that the Tribunal approached the matter on the basis that the Commission and Aveng had concluded a consent agreement under section 49D, and that the agreement was presented for confirmation in accordance with the Act. The Tribunal’s confirmation indicates acceptance that the matter was properly brought within the statutory framework allowing the Commission to conclude consent agreements and for the Tribunal to confirm them as orders.

The consent agreement itself recorded the statutory context for the settlement process, including the Commission’s investigative powers and settlement powers, the prohibition on restrictive horizontal practices under section 4(1)(b)(iii), the role of section 67 (limitation/prescription as referenced), and the penalty provisions linked to sections 58 and 59. The agreement also recorded the Commission’s stated policy objectives for the settlement initiative (transparency, efficiency, disruption of cartels, and incentivising competitive behaviour) and referred to section 217 of the Constitution in relation to the requirements for a public procurement system. The Tribunal’s order, however, did not separately analyse these considerations; it confirmed the agreement as proposed.

On the face of the order, the Tribunal made no independent findings in the published text on the underlying conduct beyond confirming the agreement containing Aveng’s admissions, the penalty, and the future-conduct undertakings as part of the settlement.

Outcome and Relief

The Tribunal confirmed the consent agreement concluded between the Competition Commission and Aveng (Africa) Ltd as an order of the Tribunal, including the annexed documents marked “A” and the addendum marked “B”.

The relief confirmed included Aveng’s obligations to pay an administrative penalty of R306 576 143, payable in three equal instalments on the timetable set out in the consent agreement, together with the agreed cooperation and compliance undertakings recorded in the consent agreement.

No separate costs order is recorded in the published text.

Cases Cited

No cases are cited in the published text of the judgment/order.

Legislation Cited

Competition Act 89 of 1998 (as amended), including sections 2, 4(1)(b), 19, 21(1), 22, 26, 49B, 49D, 53(1)(a)(iii), 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 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. 628 of 23 May 2008, published in Government Gazette No. 31064 of 23 May 2008).

Rules of Court Cited

No rules of court are cited in the published text of the judgment/order.

Held

The Competition Tribunal confirmed, as an order of the Tribunal, the consent agreement concluded between the Competition Commission and Aveng (Africa) Ltd in relation to Aveng’s admitted contraventions of section 4(1)(b)(iii) of the Competition Act 89 of 1998 involving collusive tendering in the construction industry, together with the agreed administrative penalty and future-conduct undertakings.

LEGAL PRINCIPLES

The Competition Act 89 of 1998 prohibits restrictive horizontal practices between firms in a horizontal relationship, including collusive tendering, under section 4(1)(b)(iii). The consent agreement described collusive tendering as conduct that distorts tender outcomes so that bids and results are not the product of competition on the merits, including through mechanisms such as cover pricing, tender allocation, and associated arrangements.

The Commission is empowered to investigate alleged contraventions and to conclude consent agreements under section 49D. Such a consent agreement may be presented to the Competition Tribunal for confirmation as an order, under the Tribunal’s powers to confirm agreed terms as an enforceable order in terms of section 58(1)(b) (as referenced in the consent agreement and reflected in the Tribunal’s confirmation order).

Administrative penalties may be imposed and paid in accordance with the Act (as referenced in the agreement, including sections 58 and 59), and, as recorded in the consent agreement, penalties may be calculated using an agreed methodology (here, the Commission’s published Invitation and turnover in relevant sub-sectors), with payment to be made to the Commission and paid over to the National Revenue Fund in accordance with section 59(4).

Competition Commission v Aveng (Africa) Ltd (016931) [2013] ZACT 76 (23 July 2013)