Competition Commission v BJ Transport Management Services (Pty) Lts t/a Advance Transport (CO139Oct16) [2016] ZACT 110; [2016] 2 CPLR 610 (CT) (9 November 2016)

75 Reportability

Competition Law

Brief Summary

Competition Law — Consent Agreement — Confirmation of consent agreement between the Competition Commission and BJ Transport Management Services (Pty) Ltd t/a Advance Transport regarding collusive tendering practices — Advance Transport admitted to engaging in 198 instances of cover pricing in contravention of section 4(1)(b)(i), (ii), and (iii) of the Competition Act, 89 of 1998 — Tribunal confirmed the consent agreement, imposing an administrative penalty of R709 073.12.

Comprehensive Summary

Summary of Judgment

1. Introduction

These proceedings were conducted before the Competition Tribunal of South Africa and concerned an application by the Competition Commission to have a consent agreement confirmed as an order of the Tribunal in terms of section 49D, read with sections 58(1)(a)(iii) and 58(1)(b) of the Competition Act 89 of 1998 (as amended).

The parties were the Competition Commission (as applicant) and BJ Transport Management Services (Pty) Ltd t/a Advance Transport (as respondent). The matter was heard and decided on 9 November 2016 by a panel comprising A Wessels (Presiding Member), A Ndoni, and M Mazwai.

The procedural history reflected in the confirmed consent agreement recorded that the Commission initiated a complaint concerning alleged prohibited practices in the market for furniture removal services in South Africa, and later amended that initiation to include additional firms. Ultimately, the Commission and Advance Transport concluded a settlement in the form of a consent agreement, which was presented to the Tribunal for confirmation.

The general subject-matter of the dispute concerned collusive tendering (in particular, cover pricing) relating to requests for quotations and tenders for furniture removal services, alleged to constitute contraventions of section 4(1)(b)(i), (ii), and (iii) of the Competition Act.

2. Material Facts

The material facts relied upon were largely recorded in the consent agreement and were not presented as contested on the papers before the Tribunal, given that the proceedings culminated in the confirmation of a negotiated settlement.

Chronologically, the Commission initiated a complaint on 3 November 2010 in terms of section 49B(1) of the Act into alleged prohibited practices involving collusive tendering in the furniture removal services market. The complaint initiation was amended on 1 June 2011 to add further furniture removal firms as respondents based on information obtained during the investigation, and further amended on 13 June 2013 to include additional firms.

The Commission’s investigation, as recorded in the consent agreement, found that during or about 2007 to at least December 2012, Advance Transport, together with some other implicated firms, tendered collusively in relation to the provision of furniture removal services. The collusive arrangement described involved a firm that was first approached by a customer in relation to an RFQ offering to source multiple quotations on the customer’s behalf, then approaching competitors to obtain cover prices to facilitate a predetermined outcome.

The consent agreement recorded that cover prices were either submitted directly to customers or transmitted to the competitor that wished to win the tender for onward submission. It further recorded that Advance Transport colluded with other firms (identified in the agreement as including JH Relief, Cape Express, Patrick Removals, and Sifikile) in relation to tenders issued by various entities, including government departments (expressly including the South African National Defence Force (SANDF) and the South African Police Services (SAPS)) and certain large corporates (including Eskom and Pretoria Portland Cement (PPC)).

A central, expressly admitted fact was that Advance Transport admitted it engaged in 198 instances of cover pricing conduct, which the agreement characterised as contraventions of section 4(1)(b)(i), (ii), and (iii) of the Act. The agreement also recorded that the Commission found these 198 instances constituted collusive tendering within the scope of the statutory prohibition.

3. Legal Issues

The central legal question before the Tribunal was whether to confirm the consent agreement concluded between the Commission and Advance Transport as an order of the Tribunal, under section 49D read with section 58 of the Competition Act.

The dispute, in the form presented to the Tribunal, primarily concerned the application of statutory powers and procedures to an agreed set of facts, rather than a contested factual enquiry or an adjudication on the merits of liability. The consent agreement included an admission of contravention, undertakings as to future conduct and cooperation, and an agreed administrative penalty structure, all of which required confirmation to become enforceable as a Tribunal order.

A further legal component embedded in the confirmation concerned the Tribunal’s acceptance of an agreed administrative penalty imposed under the framework of sections 58 and 59 of the Act, including the confirmation that the penalty structure recorded in the agreement complied with the statutory scheme referenced in the agreement.

4. Court’s Reasoning

The Tribunal’s reasoning, as reflected in the brief order, was confined to the confirmation of the consent agreement. The decision recorded that the Tribunal “hereby confirms the consent agreement as agreed to and proposed by the Competition Commission and [Advance Transport]”.

The legal framework underpinning that confirmation was expressly identified in the consent agreement as section 49D (consent agreements), read with sections 58(1)(a)(iii) and 58(1)(b) (Tribunal orders and remedial powers) of the Competition Act. The agreement itself recorded that the underlying prohibited practice fell within section 4(1)(b)(i), (ii), and (iii), dealing with cartel conduct, including collusive tendering and related coordination mechanisms.

The Tribunal’s role in this matter, on the text provided, was not to re-determine the evidence or to conduct a contested hearing on the alleged conduct. Instead, it was to exercise its statutory function to make the settlement binding by confirming it as an order, thereby giving enforceable effect to the admitted contraventions, the cooperation and compliance undertakings, and the administrative penalty and payment mechanism.

To the extent the confirmation entailed an evaluative component, it was reflected indirectly in the acceptance of the settlement terms recorded in the agreement, including the agreed penalty amount, the payment schedule, and the forward-looking commitments (circulation of an internal statement, compliance programme, and undertaking to engage in competitive bidding), all of which were framed as remedies and commitments consistent with the enforcement architecture of the Competition Act.

5. Outcome and Relief

The Tribunal confirmed the consent agreement and made it an order of the Tribunal on 9 November 2016.

As confirmed, the order gave effect to Advance Transport’s admission of 198 instances of cover pricing in contravention of section 4(1)(b)(i), (ii), and (iii) of the Competition Act, and imposed enforceable obligations on Advance Transport to cooperate with the Commission in the investigation and prosecution of remaining respondents, including the provision of evidence (where in existence and within its possession or control) and the obligation to testify if required.

The confirmed order also incorporated various future conduct undertakings, including the requirement to circulate a statement summarising the consent agreement to relevant personnel within 14 days of confirmation; to refrain from future contraventions of section 4(1)(b); to develop, implement, and monitor a competition law compliance programme as part of corporate governance; and to submit a copy of that programme to the Commission within 60 days of confirmation. The order further recorded an undertaking to engage in competitive bidding going forward.

The Tribunal order also made enforceable an agreed administrative penalty of R709 073.12, recorded as a cumulative penalty in respect of the 198 instances. The agreement further recorded that the penalty did not exceed 10% of Advance Transport’s annual turnover in the Republic of South Africa for the financial year ended February 2015, as described in the consent agreement. The payment terms included an initial payment of R259 073.12 within 30 days of confirmation, with the balance payable in 24 monthly instalments of not less than R20 000.00, subject to the interest arrangement recorded (no interest for the first year; thereafter interest at the prevailing rate on debts owing to the State, as described by reference to the Public Finance Management Act 1 of 1999 and the Minister of Finance’s prescription in terms of section 80(1)(b) of that Act).

No separate costs order was recorded in the text provided.

Cases Cited

No cases were cited in the text provided.

Legislation Cited

Competition Act 89 of 1998 (as amended).

Public Finance Management Act 1 of 1999 (as amended).

Rules of Court Cited

No rules of court were cited in the text provided.

Held

The Competition Tribunal confirmed, as an order, a consent agreement between the Competition Commission and BJ Transport Management Services (Pty) Ltd t/a Advance Transport concerning collusive tendering conduct (cover pricing) in the furniture removal services market.

The confirmed order incorporated an admission by Advance Transport of 198 instances of conduct contravening section 4(1)(b)(i), (ii), and (iii) of the Competition Act, imposed cooperation and compliance obligations, and required payment of an administrative penalty of R709 073.12 on the payment terms set out in the consent agreement. The agreement, upon confirmation, was recorded to operate as full and final settlement of the proceedings between the Commission and Advance Transport in respect of the prohibited practices spanning from 2007 up to and including December 2012.

LEGAL PRINCIPLES

The matter applied the statutory mechanism under section 49D of the Competition Act whereby the Competition Commission and a respondent firm may resolve a complaint through a consent agreement that is submitted to the Competition Tribunal for confirmation as a binding order under section 58.

The consent agreement proceeded on the basis that collusive tendering and associated practices such as cover pricing fall within the scope of prohibited cartel conduct contemplated by section 4(1)(b)(i), (ii), and (iii) of the Competition Act, and that such conduct may be resolved through settlement accompanied by admissions, cooperation undertakings, behavioural commitments, and an administrative penalty determined and implemented within the statutory framework of sections 58 and 59 of the Act.

The confirmation further reflected the remedial structure commonly associated with consent orders under the Act, namely enforceable obligations relating to future compliance (including the establishment of a competition law compliance programme), cooperation with ongoing investigations/prosecutions, and an administrative penalty payable on specified terms, with the consent agreement itself forming the basis for enforceability once confirmed by the Tribunal.