Competition Commission v Harding Allison Close Corporation (018846) [2014] ZACT 90; [2014] 1 CPLR 6 (CT) (18 June 2014)

75 Reportability

Competition Law

Brief Summary

Competition Law — Collusive tendering — Harding Allison Close Corporation admitting to collusive conduct in contravention of section 4(1)(b)(iii) of the Competition Act — Agreement with Group Five to submit a cover price to avoid winning a tender for a construction project — Consent agreement reached with the Competition Commission, including an administrative penalty of R78,821.94 and commitments to future compliance.

Comprehensive Summary

Summary of Judgment

1. Introduction

These proceedings took place in the Competition Tribunal of South Africa and concerned an application by the Competition Commission for the confirmation of a consent agreement concluded with Harding Allison Close Corporation (the respondent). The matter was enrolled and heard on 18 June 2014 and was decided on the same date by a panel consisting of A Roskam (Presiding Member), I Valodia (Tribunal Member), and F Tregenna (Tribunal Member).

The procedural history reflected in the record begins with the Commission’s initiation of a complaint on 1 September 2009 under CC Case No. 2009Sep4641 concerning collusive conduct in the construction industry. Following an industry-wide settlement invitation process launched by the Commission in February 2011, Harding Allison was later investigated as one of the firms implicated by settling respondents but which had not itself responded to the settlement invitation. Harding Allison ultimately agreed to resolve the Commission’s allegations by concluding a consent agreement signed in May 2014, which the Commission filed with the Tribunal together with a notice of motion seeking confirmation.

The general subject-matter of the dispute was an alleged contravention of section 4(1)(b)(iii) of the Competition Act 89 of 1998 relating to collusive tendering, specifically through the arrangement of a cover price in relation to a construction project tender.

2. Material Facts

The Tribunal’s order was based on the facts recorded in the consent agreement concluded between the Commission and Harding Allison, which set out the conduct admitted by Harding Allison and the agreed consequences.

The undisputed factual foundation, as recorded in the consent agreement, was that the Commission initiated a complaint on 1 September 2009 following receipt of applications for immunity under the Commission’s Corporate Leniency Policy. The complaint concerned alleged contraventions of section 4(1)(b) of the Act, including price fixing, market allocation, and collusive tendering, in relation to construction projects. The Commission subsequently formed the view that there was widespread collusion in the sector and accordingly published an invitation on 1 February 2011 inviting construction firms to disclose collusive projects and engage in settlement, with a closing date of 15 April 2011. A number of firms settled, and the Commission continued investigations into firms that did not participate in the invitation process but were implicated by others, including Harding Allison.

In relation to the specific conduct settled, the consent agreement recorded that Harding Allison and Group Five Construction (Proprietary) Limited (identified as a competitor) reached an agreement on or about 14 November 2005 involving a cover price for the Renault Motor Company project located at Meridian Drive, Umhlanga. The nature of the arrangement, as captured in the agreement, was that Harding Allison requested and received a cover price from Group Five so that Harding Allison would not win the tender.

The project concerned the construction of premises for Renault Motor Company at Meridian Drive, Umhlanga. The consent agreement recorded that the project started on 1 July 2006 and was completed on 31 October 2007.

Harding Allison admitted that it entered into the agreement with Group Five and that this conduct constituted collusive tendering in contravention of section 4(1)(b)(iii) of the Act. The consent agreement also recorded Harding Allison’s co-operation undertakings, including that it provided truthful and timely disclosure, co-operated fully and expeditiously, and undertook to cease and not повтор engage in prohibited practices. It further agreed to future-facing commitments, including circulating an internal statement summarising the agreement, refraining from future collusive tendering, and developing and submitting a competition law compliance programme to the Commission within specified timeframes.

3. Legal Issues

The central legal questions before the Tribunal were limited in scope by the nature of the proceedings as a consent order confirmation process. The Tribunal was required to determine whether the consent agreement concluded between the Commission and Harding Allison should be confirmed as an order of the Tribunal under section 49D, read with sections 58(1)(a)(iii) and 58(1)(b) of the Competition Act.

Although the consent agreement contained an admission of contravention of section 4(1)(b)(iii) (collusive tendering), the matter as presented to the Tribunal did not involve a contested factual dispute requiring adjudication on evidence. The dispute was therefore not one of resolving competing versions of fact, but rather concerned the application of the Tribunal’s statutory confirmation powers to an agreement reached by the parties, together with the associated remedial and penalty terms.

In addition, the consent agreement invoked the administrative penalty framework in sections 58 and 59 of the Act. The question presented in this context was whether it was appropriate, within the statutory scheme and on the parties’ agreement, for the Tribunal to confirm an order that included an administrative penalty and specified compliance obligations.

4. Court’s Reasoning

The Tribunal’s reasoning, as reflected in the order, was concise. It confirmed the order “as agreed to and proposed by the Competition Commission and the respondent,” annexed to the Tribunal’s order. The Tribunal therefore exercised the statutory power contemplated by section 49D, read with sections 58(1)(a)(iii) and 58(1)(b), to make the consent agreement an order of the Tribunal.

The consent agreement itself recorded the legal characterisation of the admitted conduct: Harding Allison’s request for and receipt of a cover price from a competitor in order to avoid winning a tender was treated as collusive tendering prohibited by section 4(1)(b)(iii) of the Act. It further recorded that the parties agreed that an administrative penalty was appropriate “having regard to” sections 58(1)(a)(iii) read with sections 59(1)(a), 59(2), and 59(3), and that the penalty amount represented 2% of Harding Allison’s annual turnover for the financial year ended 2009.

The Tribunal’s confirmation of the consent agreement necessarily entailed acceptance of the settlement structure embodied in the agreement, including the administrative penalty, payment mechanics, and prospective compliance measures. No additional evaluative reasoning (for example, a separate proportionality analysis of the penalty) was set out in the Tribunal’s order beyond the confirmation of the terms agreed by the parties.

5. Outcome and Relief

The Tribunal issued an order on 18 June 2014 confirming the consent agreement between the Competition Commission and Harding Allison Close Corporation as an order of the Tribunal.

As confirmed, the order included the following principal forms of relief. Harding Allison was required to pay an administrative penalty of R78 821.94 within 30 days of confirmation, with payment to be made to the Commission and paid over to the National Revenue Fund in accordance with section 59(4) of the Act. Harding Allison also undertook forward-looking obligations, including circulating a statement summarising the agreement to employees, refraining from future prohibited practices (including collusive tendering), implementing and monitoring a competition law compliance programme, and submitting that programme to the Commission within 60 days of confirmation.

No separate costs order was recorded in the Tribunal’s order.

Cases Cited

No case law citations are recorded in the provided judgment and annexed consent agreement.

Legislation Cited

Competition Act 89 of 1998 (as amended), including sections 4(1)(b)(iii), 19, 22, 26, 49B, 49D, 58(1)(a)(iii), 58(1)(b), 59(1)(a), 59(2), 59(3), 59(4), and 67.

Corporate Leniency Policy (Government Notice No. 628 of 23 May 2008, published in Government Gazette No. 31084 of 23 May 2008).

Rules of Court Cited

No rules of court are cited in the provided judgment and annexed consent agreement.

Held

The Competition Tribunal confirmed, as an order of the Tribunal, the consent agreement concluded between the Competition Commission and Harding Allison Close Corporation in terms of section 49D read with sections 58(1)(a)(iii) and 58(1)(b) of the Competition Act.

As a consequence of the confirmed order, Harding Allison’s admitted conduct—requesting and receiving a cover price from a competitor in relation to the Renault Motor Company tender at Meridian Drive, Umhlanga—was treated as collusive tendering in contravention of section 4(1)(b)(iii), and Harding Allison became bound to pay the agreed administrative penalty and implement the agreed compliance obligations.

LEGAL PRINCIPLES

The matter applied the statutory mechanism allowing the Competition Commission and a respondent firm to resolve alleged prohibited practices through a consent agreement which, once confirmed by the Competition Tribunal, becomes enforceable as an order of the Tribunal in terms of section 49D read with section 58 of the Competition Act.

The consent agreement reflected the application of section 4(1)(b)(iii) of the Competition Act to collusive tendering, including conduct described as the exchange or use of a cover price between competitors in the context of a tender process.

The outcome further reflected the application of the Act’s administrative penalty framework, in terms of which the Tribunal may confirm an agreed administrative penalty under section 58, with penalty considerations referenced to section 59, and with payment to be paid over to the National Revenue Fund in terms of section 59(4).