Brief Summary

Competition Law — Consent Agreement — Collusive tendering — Giuricich Bros Construction (Pty) Ltd admitting involvement in collusive conduct in contravention of section 4(1)(b)(iii) of the Competition Act, 1998 — Agreement reached with Vlaming (Pty) Ltd to submit a cover price for a tender — Tribunal confirming consent agreement proposed by the Competition Commission and Giuricich Bros — Conduct constituting a prohibited practice under the Act.

Comprehensive Summary

Summary of Judgment

1. Introduction

This matter concerned an application to the Competition Tribunal for the confirmation of a consent agreement concluded between the Competition Commission of South Africa (the applicant) and Guiricich Bros Construction (Pty) Ltd (the respondent). The proceedings were brought under section 49D of the Competition Act 89 of 1998 for an agreed settlement to be made an order of the Tribunal in terms of section 58 of the Act.

The procedural history reflected that the Commission had initiated complaints during February 2009 and September 2009 concerning alleged prohibited practices in the construction industry, including collusive tendering. Following a broader industry initiative, 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). Guiricich Bros participated in that settlement process and ultimately concluded a consent agreement with the Commission during May/June 2013, later supplemented by an addendum in July 2013.

The Tribunal heard the matter on 17 July 2013 and, on 23 July 2013, issued an order confirming the consent agreement and the addendum as an order of the Tribunal. The dispute related generally to collusive tendering (bid-rigging) in the construction sector, specifically conduct characterised as the provision and/or use of a cover price in a tender process, constituting a contravention of section 4(1)(b)(iii) of the Competition Act.

2. Material Facts

The material facts were primarily those recorded in the consent agreement and were not presented as contested in the Tribunal’s order. The Commission had initiated a complaint on 10 February 2009 in terms of section 49B(1) of the Act into alleged collusive conduct relating to the construction of stadiums for the 2010 FIFA Soccer World Cup against various construction firms. A further complaint was initiated on 1 September 2009 (also in terms of section 49B(1)), following applications for immunity under the Commission’s Corporate Leniency Policy, concerning broader collusion in the construction industry involving alleged contraventions of section 4(1)(b) (including price fixing, market allocation, and collusive tendering) by numerous firms.

Arising from its investigations, the Commission considered there to be widespread collusion in the construction industry and, to facilitate resolution, issued an invitation (published 1 February 2011) for firms to engage in settlement on specified terms. Guiricich Bros participated in this process, describing itself as operating in the general building subsector and specialising in development and building construction, property development construction, project management, and related activities.

The consent agreement recorded that Guiricich Bros had applied for leniency and settlement and disclosed multiple projects for which it was allegedly first to apply and for which it was granted conditional immunity. The agreement further recorded that Guiricich Bros was implicated in one non-prescribed prohibited practice (one project) in the general building subsector which it did not disclose. The specific contravention addressed in the consent agreement related to the Millwood Village Residential Project (Tender No: NPK0366PBC).

In respect of that project, the agreement recorded that on or about August 2005, Guiricich Bros reached an agreement with Vlaming (Pty) Ltd involving a cover price arrangement in relation to the tender. The recorded purpose of the arrangement was that Vlaming provided a cover price to Guiricich Bros to enable Vlaming to win the tender. The project related to the construction of residential blocks at Millwood Village, Bryanston, for Finishing Touch Trading 55 (Pty) Ltd. The project was recorded as having been awarded to Group Five and completed on 22 July 2007.

Guiricich Bros admitted in the consent agreement that it was involved in collusive conduct in contravention of section 4(1)(b)(iii) in that it tendered collusively in respect of the practice described. It also provided recorded undertakings of cooperation and future compliance, including that it had ceased engaging in prohibited practices, had not destroyed or concealed information, and would continue cooperating, including by providing evidence and testifying if required.

An addendum to the consent agreement recorded a further agreed modification: the heading of clause 5 of the consent agreement was to be replaced so as to read “Non disclosed project”.

3. Legal Issues

The central legal question before the Tribunal was whether the consent agreement concluded between the Commission and Guiricich Bros should be confirmed as an order of the Tribunal in terms of section 49D, read with section 58(1)(a)(iii) and section 58(1)(b) of the Competition Act.

The matter did not present a contested factual dispute for adjudication on the merits. Rather, it concerned the application of statutory settlement and remedial provisions to an agreed set of facts and admissions, including the respondent’s admission of a contravention of section 4(1)(b)(iii) and its agreement to an administrative penalty and compliance-related undertakings.

To the extent evaluative judgment was involved, it lay in the Tribunal’s function of making the consent agreement an enforceable order, including the administrative penalty and compliance obligations, within the framework permitted by the Act.

4. Court’s Reasoning

The Tribunal’s published decision was in the form of a short order, recording that it confirmed the order as agreed to and proposed by the Competition Commission and the respondent, annexed as “A” (the consent agreement) and “B” (the addendum). The Tribunal did not provide additional independent reasoning on the merits of the contravention or penalty beyond confirming the agreement as presented.

The consent agreement itself set out the statutory framework under which the settlement was concluded. It identified the Commission’s powers to investigate prohibited practices and to conclude consent agreements under section 49D, and it recorded that confirmation was sought under section 58. The agreement located the prohibited conduct within section 4(1)(b)(iii) (collusive tendering) and described “cover pricing” as conduct that distorts the tender process and is not the result of competition on the merits. It also referenced the statutory objects of the Act in section 2, and, as context for procurement, referred to section 217 of the Constitution requiring a procurement system that is fair, equitable, transparent, competitive, and cost-effective.

The agreement further dealt with prescription-related limitations by recording that it set out details of non-prescribed prohibited practices only, with reference to section 67 of the Act, and that the penalty was calculated taking into account only such non-prescribed conduct. It then provided for an agreed administrative penalty under sections 58 and 59, computed on the basis described in the Commission’s settlement invitation, and imposed specific future-conduct commitments, including a competition law compliance programme and cooperation obligations.

On that basis, the Tribunal’s confirmation operated to give the settlement terms binding force as an order, including the penalty, the payment schedule, and the compliance undertakings.

5. Outcome and Relief

The Tribunal confirmed the consent agreement and the addendum as an order of the Competition Tribunal.

As confirmed, the order incorporated an administrative penalty payable by Guiricich Bros in the amount of R3 552 568, to be paid in two equal instalments of R1 776 284. The first instalment was payable on or before 31 July 2013 or within 30 days of confirmation (whichever was later), and the second instalment was payable on or before 31 August 2014. The agreement further recorded that the Commission would pay the penalty over to the National Revenue Fund in accordance with section 59(4) of the Act.

The confirmed agreement also required Guiricich Bros to develop, implement, and monitor a competition law compliance programme, to submit it to the Commission within 60 days of confirmation, and to circulate a summary statement of the consent agreement to management and operational staff within 60 days of confirmation. It further recorded ongoing cooperation obligations, including provision of evidence and potential testimony.

The published Tribunal order did not record a separate costs order.

Cases Cited

No reported cases were cited in the published Tribunal order or in the text of the consent agreement as reproduced.

Legislation Cited

Competition Act 89 of 1998 (as amended), including sections 2, 4(1)(b)(iii), 19, 21(1), 22, 26, 49B(1), 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), published under Government Notice No. 692 of 9 June 2004 in Government Gazette No. 26427 of 9 June 2004, and related amendments referenced in the consent agreement.

Corporate Leniency Policy, referenced as 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 were cited in the published Tribunal order or in the reproduced consent agreement.

Held

The Competition Tribunal confirmed, as an order, the consent agreement (together with its addendum) concluded between the Competition Commission and Guiricich Bros Construction (Pty) Ltd.

The confirmed order recorded Guiricich Bros’ admission of participation in collusive tendering in contravention of section 4(1)(b)(iii) of the Competition Act, arising from a cover pricing arrangement relating to the Millwood Village Residential Project.

The confirmed order imposed an agreed administrative penalty of R3 552 568, payable in two equal instalments on the stated dates, and incorporated undertakings concerning cooperation, cessation of prohibited conduct, implementation of a compliance programme, and internal dissemination of the settlement terms.

LEGAL PRINCIPLES

A consent agreement concluded between the Competition Commission and a respondent in terms of section 49D of the Competition Act may be made binding and enforceable by being confirmed as an order of the Competition Tribunal in terms of section 58.

Collusive tendering (including bid-rigging through cover pricing) constitutes a prohibited restrictive horizontal practice under section 4(1)(b)(iii) of the Competition Act, as recorded in the settlement and admitted by the respondent for the purposes of the consent order.

An administrative penalty may be imposed and confirmed through a consent order under sections 58 and 59 of the Competition Act, and payment over to the National Revenue Fund follows in accordance with section 59(4), as reflected in the agreed settlement terms.

Consent orders in competition matters may incorporate forward-looking compliance and cooperation obligations, including the adoption of competition law compliance programmes and ongoing assistance to the Commission in related proceedings, where such obligations form part of the agreed settlement placed before the Tribunal for confirmation.

Competition Commission v Guiricich Bros Construction (Pty) Ltd (016972) [2013] ZACT 77 (23 July 2013)