SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this
document in compliance with the law and SAFLII Policy
COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 019976
In the matter between:
The Competition Commission.............................................................................................................Applicant
And
African Oxygen Limited...................................................................................................................Respondent
Panel: N Manoim (Presiding Member)
Y Carrim (Tribunal Member)
A Wessels (Tribunal Member)
Heard on: 28 January 2015
Latest amendment received on:22 April 2015
Decided on: 22 April 2015
Order
The Tribunal hereby confirms the consent agreement as agreed to and proposed by the Competition
Commission and African Oxygen Limited and the amendments to the consent agreement, annexed hereto
marked “A”, “B” and “C” respectively.
22 April 2015
Date
Presiding Member
Mr. N Manoim
Concurring: Ms. Y Carrim and Mr. A Wessels
IN THE COMPETITION TRIBUNAL OF SOUTH AFRICA
CC CASE NO: 2015Apr5739
CT CASE NO: 67/CR/Jun12
In the matter between;
THE COMPETITION COMMISSION.........................................................................................Applicant
and
AFRICAN OXYGEN LIMITED..........................................................................................First Respondent
AIR PRODUCTS (PTY) LTD..........................................................................................Second Respondent
CC CASE NO: 2009Oct4734
CT CASE NO: 019976
And in the matter between:
THE COMPETITION COMMISSION............................................................................................Applicant
and
AFRICAN OXYGEN LIMITED...........................................................................................First Respondent
SASOL CHEMICAL INDUSTRIES (PTY) LTD............................................................Second Respondent
SETTLEMENT AGREEMENT BETWEEN THE COMPETITION COMMISSION AND AFRICAN
OXYGEN LIMITED IN REGARD TO THE ALLEGED CONTRAVENTION OF SECTIONS
4(1)(b)(ii) AND 5(1) OF THE COMPETITION ACT, NO. 89 OF 1993, AS AMENDED
The Competi tion Commission and African Oxygen Limited hereby agree that application be made to the
Competition Tribunal (“the Tribunal”) for an order confirming this Settlement Agreement as an Oder of the
Tribunal in terms of section 49D read with section 58(1)(a)(ii i) and section 58(1)(b) as well as section
59(l)(a) of the Competition Act No. 89 of 1993 as amended, on the terms set out below.
1. Definitions and interpretation
1.1. For the purposes of this Settlement Agreement the following definitions shall apply:
1.1.1 “Act” means the Competition Act 89 of 1998, as amended;
1.1.2 “Afrox” means African Oxygen Limited, a company duly registered and incorporated in
terms of the company laws of the Republic of South Africa, with its principal place of
business at 23 Webber Street, Selby, Johannesburg;
1.1.3 “Air Products ” means Air Products (Pty) Ltd, a company duiy registered and
incorporated in terms of the company laws of the Republic of South Africa, with its principal
place of business at 4 Spencer Road, Kempton Park, Johannesburg;
1.1.4 “Air Products Agreements” means the 1998 Agreement and the 2000 Agreement;
1.1.5 “Air Products Complaint ” means the complaint initiated by the Commissioner on 20
Aprii 2011, in terms of section 49B(1} of the Act, against Afrox and A ir Products for an
alleged contravention of section 4(1)(b)(ii) of the Act under case number 2011 Apr5739;
1.1.6 “Air Products Complaint Referral ” means the complaint referral instituted by the
Commission in terms of section 498 of the Act oh 22 June 2012 against Afrox and Air
Products under case number 67/CR/Jun12;
1.1.7 “Central Region ” means Gauteng Province, Free State Province, Limpopo Province,
Mpumalanga Province, Northern Cape Province and the North West Province;
1.1.8 “CLP” means the Corporate Len iency Policy issued by the Commission in terms of the
Act to clarify the Commission ’s policy approach on matters falling within its jurisdiction in
terms of the Act as published in the Government Gazette Notice 628 of-2008;
1.1.9 鼎O2” means carbon dioxide;
1.1.9 鼎O2” means carbon dioxide;
1.1.10 “Commission” means the Competition Commission of South Africa, a statutory body
established in terms of section 19 of the Act, with its principal ptece of business at Building C,
Mulayo Building, DTI Campus, 77 Meintjiés Street, Sunnyside, Pretoria;
1.1.11 鼎ommissioner" means the Commissioner of the Competition Commission, appointed
in terms of section 22 of the Act;
1.1.12 “Natref” means National Refineries of South Africa (Pty), Ltd;
1.1.13 “Natref Refinery” means Natref s refinery at Sasolburg;
1.1.14 “SCI” means Saso í Chemical industrial Limited, a'company duly registered and
incorporated in terms of the company laws of the Republic of South Africa, with its principal
place of business at 15 Baker Street, Rosebank, Johannesburg;
1.1.15 “SCI Agreement” means the agreement concluded between SCI and Afrox on 18 July
1994, in relation to the sale and purchase of raw C02, as amended on 2 August 1996 and 7
December 2004;
1.1.16 “SCI Complaint” means the complaint initiated by the Commissioner on 27 Octo ber
2009, in terms of section 49B(1) of the Act, against Afrox and SCi for an alleged
contravention of sections 4(1)(b)(?i) and 5(1) of the Act under case number 2009Gct4734;
1.1.17 “SCI Complaint Referral” means the complaint referral instituted by the Co mmission
in terms of section 49B of the Act on 27 March 2013 against Afrox and SCI, under case
number___;
1.1.18 “Settlement Agreement ” means this agreement duly signed and concluded between
the Commission and Afrox;
1.1.19 “the 1998 Agreement " means the a greement between Afrox and Air Products arising
out of the email agreement concluded between Afrox and Air Products on 23 September 1998
which relates, inter alia, to the supply of raw C02 produced by the Natref Refinery;
1.120 "the 2000 Agreement ” means the agreement between Afrox and Air Products arising
out of the heads of agreement concluded between Afrox and Air Products on 20 November
2000, which relates, inter afia, to the supply of raw C02 produced by the Natref Refinery, as
amended on 25. April 2001;
1.1.21 “Tribunal” means the Competition Tribunal of South Africa, a statutory body
1.1.21 “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 building (Block C), the DTI Campus, 77 Meirctjies -Street, Sunnysi de, Pretoria,
Gauteng.
1.2. Clause headings are for convenience purposes only, shall not be used in the interpretation of the
Settlement Agreement and shall not be construed as being statements of fact.
A. SCI COMPLAINT
2. The Complaint investigation
2.1. On 01 June 2009, SCI was granted conditional immunity by the Commission in terms of the CLP for its
role in concluding and implementing the SCI Agreement. On 27 October 2009, the Commissioner* acting in
terms of section 49(B) 1 of the Act, initiated t he SCI Complaint against Afrox and SCI for an alleged
contravention of sections 4{l)(b)(ii) and 5(1) of the Act.
2.2. The Commission's investigation established that on 1S July 1994, Afrox and SCI concluded the SCI
Agreement in terms of which SCI undertook, on an exclusive basis, to supply Afrox with raw C02. Afrox and
SCI agreed that SCI would supply the raw C02 streams emanating from its ammonia plant at its factory at
Sasolburg and from the hydrogen plant at the Nairef Refinery, to Afrox. The Commission found that
although the SCI Agreement is a supply agreement which is vertical in nature, the agreement contains
horizontal restraints which effectively divide the market for C02 and urea.
2.3. The material terms of the SCI Agreement relevant to the complaint read as follows:
“1. SALE AND PURCHASE
SASOLCHEM shall sell to AFROX and AFROX shall purchase from SASOLCHEM raw carbon
dioxide streams emanating -at atmospheric pressure from the top of the carbon dioxide desorber at
the Ammonia plant at the Sasol Chemical Industries (Pty) Ltd factory (Sasolburg) and from the top of
the MEA carbon dioxide stripper column situated at the hydrogen plant at the Natref refinery
(Sasolburg) in terms of the Agreement
SASOLCHEM hereby also warrants that it is the sole agent wi thin the Sasol group of companies for
the sale of carbon dioxide...
Clause 4.1
the sale of carbon dioxide...
Clause 4.1
SASOLCHEM shall subject to clause 4.2 not sell the raw carbon dioxide streams described in clause
1 of this Agreement or any part of these streams or any other carbon dioxide st reams that are
available to Sasof in Sasofburg or will become available to Sasol in Sasolburg or any liquid carbon
dioxide manufactured from these streams or part thereof to any other gas company or any other
end-user than AFROX.
Clause 4.3
Notwithstanding the provisions of clause 4,1 above any company or division within the Sasol group of
companies shall be entitled to utilize those quantities of pure carbon dioxide contained in raw carbon
dioxide streams described in clause 1 of this Agreement that are in excess of the quantities set out
under the heading "Optimistic forecast of requirement in clause 6,3 of this Agreement for internal use
and or the manufacture of urea by Sasol ora third party.
Clause 6.4
SASOLCHEM expect that the requirement of pure C02 f or internal use or manufacture of urea wili
not exceed 268 185 tons per annum. SASOLCHEM shall give AFROX at least one years ’ (sic) written
notice of any intention to utilize pure carbon dioxide for interna! use in terms of clause 4.3 of this
Agreement.”
2.4. The Commission duly investigated the complaint and found that the SCI Agreement results in the
division of markets by allocating specific types of goods and services in contravention of section 4(1){b)(ii)
of the Act on the basis of, inter alia, the following-
2.4.1. clause 4.1 of the SCI Agreement provides that SCI shall sell the raw C02 streams emanating
from its ammonia plant at its factory at Sasoiburg and from the hydrogen plant at the Natref Refinery,
only to Afrox; and
2.4.2. clause 4.3 of the SC I Agreement restricts SCI to using raw C02 from the plants referred to in
2.4.1 above for internal use or for the manufacture of urea by SCI or a third party.
2.4.3. The Commission therefore found that the SCI Agreement -
2.4.3.1. precludes SCI from enteri ng the downstream market for the production and supply of
gaseous C02 and liquid C02, in competition with Afrox; and
2.4.3.2. restrains SCi's use of raw C02 to internal supply and/or the production of urea by
Sasol or a third party.
Sasol or a third party.
2.5. In addition, the Commission found that the exclusivity provisions in the SCI Agreement result in
input foreclosure of actual and potential competitors of Afrox in the market for the production and
supply of gaseous C02 and liquid CC2 by precluding them from accessing the ra w C02 streams that
are produced by Sasol in the Central Region. The Commission further found that there are no
alternative viable sources of raw C02 streams in the Central Region, and that sourcing raw C02
streams from outside the Central Region is costly. Consequently, the Commission found that the
exclusivity provisions in the SCI Agreement result in the substantial prevention and lessening
competition in the C02 market in contravention of section 5(1) of the Act.
2.6 Whilst not in agreement with the Comm ission’s findings, Afrox accepts that the restraints in
question amount to contraventions of section 4(1)(b)(ii) and section 5(1) of the Act.
B. AIR PRODUCTS COMPLAINT
3. The Complaint Investigation
3.1 On 4 February 2011, Air Products was granted conditio nal immunity in terms of the CLP, for its
involvement in concluding and implementing the Air Products Agreements. On 20 April 2011 the
Commissioner initiated the Air Products Complaint in terms of section 49B(1) of the Act against Afrox and
Air Products, f or an alleged contravention of section 4(1)(b)(ii) of the Act by concluding the Air Products
Agreements.
3.2. In 1994, Air Products was awarded a tender to supply Rand Water with 84 tonnes per day ("TPD") of
gaseous C02 from 1996 ramping up to a maximum of 222.5 TPD by 2015. One of Air Products ・ sources of
C02 is the Natref Refinery. Natref is jointly owned by Total South Africa ( 典SA・) and SCI. This refinery
emits a total of 350 tonnes of raw C02 per day. The quantities of raw C02 emissions to which TSA and SCI
are entitled at the Natref Refinery are in proportion to the shares that each firm holds in Natref. SCI holds a
63.6% interest in Natref while the remaining 36.4% is owned by TSA, Consequently, TSA is entitled to 130
TPD (典SA allocation'1) while SCI is entitled to the other 220 TPD (鉄CI allocation・).
3.3. On 01 October 1996, Air Products entered into an agreement with TSA in terms which Air Products was
entitled to extract raw C02, streams in an amount equivalent to the TSA allocation from the Natref R efinery
i.e. 36,4%. In terms of the SCI Agreement, Afrox was entitled to extract raw C02 streams in an amount
equivalent to the SCI allocation from the Natref Refinery i.e. 63.6%.
3.4. Afrox and Air Products concluded the 1998 Agreement in terms of which, inter alia, Afrox granted Air
Products the right to a large portion of its (Afrox) share of the C02 produced at the Natref Refinery, which
C02 would be used by Air Products solely to fulfill its commitment to supply C02 to Rand Water. The 1998
Agreement, inter a//a, further provided that Air Products would supply Afrox all its spare liquid C02 that it
did not require to supply its merchant customers. The relevant terms of the 1998 Agreement read as follows:
“1. Afrox hereby grants Air Products an entitleme nt to 75tpd of Afrox ’s 63.64% share of the C02
produced at Natref. This product will be used by Air Products solely to fulfil Air Products ’
contractual commitment to supply future increased volumes of gaseous CO2 via pipeline to Rand
Water’s water treatment plant...
2. In return for 1 above, Air Products hereby grants Afrox the sole industrial gas company to all of
the spare LCO2 produced by Air Products ' LCO2 plant at Natref (of currently between 10tpd and
20tpd - that is not required by Air Products for supply of its portfolio of merchant [i.e. non -industrial
gas company] customers).”
3.4. The Commission found that the 1993 Agreement contained a restraint which resulted in market division
by allocating the liquid C02 market to Afrox and the gaseous 002 ma rket to Air Products in contravention of
section 4(1 )(b)(íi) of the Act, The Commission also formed the view that the restraint is not an essential term
of supply,
3.5. On 20 November 2000, Afrox and Air Products concluded the 2000 Agreement, in terms of which it was
agreed that Afrox would supply stipulated tonnages of gaseous C02 to Air Products, and Air Products would
only use the gaseous CO2 sourced from Afrox to supply gaseous C02 to Rand Water and to produce liquid
CO2 for supply to Afrox. The relevant terms of the 2000 Agreement read as follows:
“3. SUPPLY AND USE OF CARBON DIOXIDE
3.1. Air Products requires 250 (two hundred and fifty) tons of gaseous Carbon dioxide per day
in order to fulfil its supply obligations to Rand Water.
3.2...
3.3. Air Products will utilise the 130 (one hundred and thirty) tons per day [ol] gaseous
Carbon Dioxide made available to it in terms of the TSA Agreement to supply Rand Water and
Air Products Liquefaction Plant
Air Products Liquefaction Plant
3.4. The additional 155 (one hundred and fifty -five) tons per day of gaseous Carbon Dioxide
required by AIR PRODUCTS in excess of that available in terms of the TSA Agreement will be
purchased from AFROX.
3.5. Afrox shall sell AIR PRODUCTS the gaseous Carbon Dioxide referred to . in clause 3.4
above, which is produced at Natref and purchased from SCI in terms of its agreement with
SCI after AFROX’s requirements for liquid Carbon Dioxide are satisfied.
3.6. Such gaseous Carbon Dioxide purchased from AFROX shall be used exclusively by AIR
PRODUCTS to supp ly Rand Water and for the production of Liquid Carbon Dioxide to be
supplied to AFROX in terms hereof
3.7...
3.8...
3.9. AIR PRODUCTS will supply all the Liquid Carbon Dioxide produced from the AIR
PRODUCTS Liquefaction plant to AFROX”
3.6. The Commission found that by concluding the 1998 Agreement and the 2000 Agreement, Afrox and Air
Products agreed not to compete with each other in respect of liquid CO2 and gaseous C02. The Commission
thus found that, in terms of the 2000 Agreement, Afrox and Air Product s allocated the liquid C02 market to
Afrox and the gaseous C02 market to Air Products in contravention of section 4(1)(b)(ii) of the Act, The
Commission also found that the restraint was not an essential term of supply.
4 . Admission In respect of the SCI Complaint
Afrox confirms that although the SCI Agreement is a vertical agreement between SCI and Afrox, the
restraints referred to above amount to a contravention of section 4(1)(b)(ii) and section 5(1) of the Act
respectively.
5. Admission in respect of the Air Products Complaint
Afrox confirms that, although the Air Products Agreements are vertical mutual supply agreements, the
restraints referred to above amount to a contravention of section 4(1)(b)(fi) of the Act.
6 . Agreement concerning future conduct
6.1. Afrox tenders to agree to the amendment of the 2000 Agreement by the deletion of clauses 3.3
and 3.6 thereof.
6.2. Afroxtenders to agree to the amendment of the SCI Agreement by the deletion of-
6.2.1. clauses 4.1 and 4.2 thereof; and .
6.2.2. the words “Notwithstanding the provisions of clause 4.1 above” from clause 4.3 thereof.
6.3. Afrox agrees to circulate a statement summarising the content of this Consent Agreement to al!
Afrox痴 employees who are middle managers and above within 30 days of the date of confirmation
of this Consent Agreement as an order of the Tribunal.
7 Administrative penalty
7.1. Having regard to the provisions of section 58(1}{a)( »s) as read with sections 59(1 )(a), 59(2) and 59(3)
of the Act, Afrox has agreed to p ay an administrative penalty in the sum of R3 269 865 (three miiiion two
hundred and sixty nine thousand eight hundred and sixty five rand), which represents -
7.1.1. 3% of Afrox ’s turnover from its plant at the Natref Refinery for its 2008 financial year, being
the affected turnover for purposes of the Air Products Complaint; and
7.1.2. 2.5% of Afrox’s turnover from its plant at the Saso! Ammonia Plant for its 2012 financial year,
being the affected turnover for purposes of the SCI Complaint.
B Terms of payment
8.1 Afrox shall pay the amount set out in paragraph 7 above to the Commission within 30 days from the date
of confirmation of this Consent Agreement by the Tribunal.
8.2. This payment shall be made into the Commission’s bank account, the details of which are as follows:
Bank name: Absa bank
Branch name; Pretoria
Account Holder: Competition Commission Fees Account
Account number: [...]
Account type: Current Account
Branch Code: 323 345
Reference: 20090ct4734/201lApr5739/Afrox
8.3. The penalty will b e paid over by the Commission to the National Revenue Fund in accordance with
section 59(4) of the Act.
9 Full and final settlement
This Settlement Agreement is entered into in full and final settlement of the SCI Complaint and the Air
Products Complaint, and upon confirmation as an order by the Tribunal, concludes all proceedings between
the Commission and Afrox, relating to alleged contraventions of sections 4(1)(b)(ii) and 5(1) of the Act, that
are the subject of the Commission ’s investigations under Com mission Case No. 2011Apr5739 and
Commission Case No. 20090ct4734.
For African Oxygen Limited
Brett Kimber
Authorised signatory for African Oxygen Limited
Dated and signed Selby on the 31 day of October 2014.
For the Commission
Dated and signed Pretoria on the 11 day of November 2014.
Tembinkosi Bonakele
Competition Commissioner