Competition Commission v B And E International (Pty) Ltd (019091) [2014] ZACT 17 (24 July 2014)

75 Reportability

Competition Law

Brief Summary

Competition Law — Collusive tendering — Consent agreement — B&E International (Pty) Ltd admitting to collusive practices in contravention of section 4(1)(b)(iii) of the Competition Act — Agreement to pay an administrative penalty of R8,158,447 and to implement a compliance program — Tribunal confirming the consent agreement as an order.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings were before the Competition Tribunal of South Africa and took the form of an application by the Competition Commission for the confirmation of a consent agreement as a Tribunal order. The consent agreement was concluded in terms of section 49D of the Competition Act 89 of 1998 (as amended), read with sections 58(1)(a)(iii) and 58(1)(b).

The parties were the Competition Commission (applicant) and B & E International (Pty) Ltd (respondent), a firm active in mobile crushing and screening services to the civil engineering industry, and also involved in surface mining and mineral processing.

The matter arose from a broader Commission investigation initiated after immunity applications under the Commission’s Corporate Leniency Policy and directed at collusive practices in the construction sector. Within that broader investigation, B & E International was implicated in collusive conduct concerning a particular tender. The respondent ultimately agreed to settle the specific conduct described in the consent agreement, and the Tribunal was asked to confirm that agreement as an order.

The general subject-matter of the dispute concerned alleged and admitted collusive tendering (including the provision of a cover price) in relation to a construction-related tender for works associated with Eskom’s Ingula pumped-storage scheme, and the appropriate regulatory consequences under the Competition Act, including an administrative penalty and compliance undertakings.

2. Material Facts

The Commission initiated a complaint on 1 September 2009 (case number 2009Sep4641) following the receipt of immunity applications under the Corporate Leniency Policy. The complaint concerned alleged contraventions of section 4(1)(b) of the Competition Act in relation to price fixing, market allocation, and collusive tendering in the construction sector. The investigation initially targeted a range of firms, and subsequent leniency applications led the Commission to believe collusion was widespread in the sector.

On 1 February 2011, the Commission published an invitation to firms in the construction industry to engage in settlement on favourable terms through disclosure of projects involving prescribed and non-prescribed prohibited practices, with a closing date of 15 April 2011. The Commission received settlement applications from 21 firms disclosing 300 projects, and many consent agreements were concluded and confirmed by the Tribunal in July 2013. The Commission thereafter continued investigations of firms that did not respond to the invitation but were implicated by those that did. B & E International was one of the implicated firms and later agreed to settle in relation to the project for which it was implicated.

The specific conduct addressed in the consent agreement related to the Braamhoek Quarry Dam tender (Tender no. CED0022/EM), described as civil works for the Braamhoek pumped storage scheme, with Eskom as the client. The project commenced on 14 May 2007 and was completed in October 2013.

In respect of that tender, the consent agreement recorded that on or about February 2007, B & E International reached an agreement with Grinaker-LTA (a competitor) in terms of which Grinaker-LTA received a cover price from B & E International, and tender qualifications were also discussed during 2007. The stated purpose of this arrangement was to ensure that Grinaker-LTA would submit a higher price than B & E International and thereby be eliminated as a competitor from the tender. The tender was ultimately awarded to B & E International.

B & E International admitted that it entered into the agreement with its competitor in contravention of section 4(1)(b)(iii) of the Act. The consent agreement further recorded, insofar as the Commission was aware, that B & E International provided truthful and timely disclosure, cooperated expeditiously, undertook to cease and not to engage in prohibited practices in future, and confirmed it had not destroyed or falsified information or misrepresented material facts.

3. Legal Issues

The central legal question before the Tribunal was whether the consent agreement concluded between the Commission and B & E International, addressing an admitted contravention of section 4(1)(b)(iii) (collusive tendering), should be confirmed as an order of the Tribunal under section 49D, read with sections 58(1)(a)(iii) and 58(1)(b).

Within the consent agreement framework, the issues addressed were not a contested factual dispute requiring the Tribunal to make credibility findings. Rather, the matter primarily involved the application of the statutory settlement mechanism to an admitted contravention, including confirmation of agreed obligations and an agreed administrative penalty contemplated by the Act.

4. Court’s Reasoning

The Tribunal’s reasoning, as reflected in the brief order, was confined to the confirmation of the consent agreement presented by the parties. The Tribunal recorded that it confirmed the order as agreed to and proposed by the Competition Commission and the respondent, as annexed to the Tribunal’s order and marked “A”.

The consent agreement itself set out the statutory basis for confirmation, namely section 49D (consent orders), read with sections 58(1)(a)(iii) and 58(1)(b) (the Tribunal’s powers to make orders in relation to prohibited practices and administrative penalties). It also identified the admitted prohibited practice as collusive tendering through the provision of a cover price, which the agreement characterised as contravening section 4(1)(b)(iii).

In confirming the agreement as an order, the Tribunal necessarily gave effect to the agreed regulatory consequences contained in that agreement, including the administrative penalty, future conduct undertakings, and compliance programme obligations. No additional evaluative discussion, factual analysis, or legal exposition beyond the confirmation of the agreed order appears from the Tribunal’s recorded decision.

5. Outcome and Relief

The Tribunal made an order on 24 July 2014 confirming the consent agreement between the Commission and B & E International as an order of the Tribunal.

As confirmed, the order included an administrative penalty of R 8 158 447 (stated to represent 2% of B & E International’s annual turnover for the financial year ended February 2013), payable to the Competition Commission within 30 days of confirmation, for payment into the National Revenue Fund in accordance with section 59(4).

The confirmed order also imposed forward-looking obligations on B & E International, including the circulation of a statement summarising the agreement to employees, managers, and directors within 14 days, a commitment to refrain from collusive tendering and other prohibited practices, and the development, implementation, monitoring, and submission to the Commission of a competition law compliance programme within 60 days.

No costs order was recorded in the Tribunal’s order or the consent agreement text provided.

Cases Cited

No cases were cited in the text provided.

Legislation Cited

Competition Act 89 of 1998 (as amended), including sections 4(1)(b), 4(1)(b)(iii), 19, 22, 28, 49B, 49D, 58(1)(a)(iii), 58(1)(b), 59(1)(a), 59(2), 59(3), 59(4), and 87.

Rules of Court Cited

No rules of court were cited in the text provided.

Held

The Tribunal confirmed, as an order, the consent agreement concluded between the Competition Commission and B & E International (Pty) Ltd in respect of collusive tendering conduct involving the provision of a cover price in the Braamhoek Quarry Dam tender. The confirmed order required payment of an administrative penalty of R 8 158 447, imposed compliance and future-conduct obligations, and recorded that the settlement was in full and final settlement of the specific conduct described in the consent agreement.

LEGAL PRINCIPLES

The judgment applied the statutory mechanism permitting the Competition Commission and a respondent firm to resolve a complaint concerning a prohibited practice by concluding a consent agreement and approaching the Competition Tribunal for confirmation of that agreement as a Tribunal order, in terms of section 49D read with sections 58(1)(a)(iii) and 58(1)(b) of the Competition Act.

It reflected the application of the principle that collusive tendering, including the provision of a cover price between competitors with the purpose or effect of manipulating tender outcomes, constitutes a contravention of section 4(1)(b)(iii) of the Competition Act, and may attract an administrative penalty in terms of section 58 read with section 59, with payment over to the National Revenue Fund in accordance with section 59(4).

It further reflected the use, within a consent-order framework, of remedial and preventive undertakings directed at future compliance, including commitments to cease prohibited practices, to engage in competitive bidding, to communicate the settlement terms internally, and to develop and submit a competition-law compliance programme as part of corporate governance measures.