Competition Commission v Paramount Mills (Pty) Ltd (CR087Mar10/SA253Feb19) [2019] ZACT 19 (13 March 2019)

75 Reportability

Competition Law

Brief Summary

Competition Law — Settlement Agreement — Confirmation of settlement agreement between Competition Commission and Paramount Mills (Pty) Ltd — Paramount admitting to price fixing in contravention of section 4(1)(b)(i) of the Competition Act — Tribunal confirming agreement and imposing administrative penalty of R1 320 819.00 — Paramount to implement compliance program to prevent future contraventions.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings were consent-order (settlement) proceedings before the Competition Tribunal of South Africa in which the Tribunal was asked to confirm a settlement agreement concluded between the Competition Commission and Paramount Mills (Pty) Ltd as an order of the Tribunal.

The Competition Commission acted as the applicant, and Paramount Mills (Pty) Ltd as the respondent. The matter concerned alleged contraventions of the Competition Act 89 of 1998 arising from collusive conduct in the white maize milling industry, specifically price fixing and related coordination.

In procedural terms, the Commission had initiated a complaint in March 2007 in the maize milling industry and, following investigation and amendments to include additional market participants, pursued enforcement under the Competition Act. Paramount ultimately concluded a settlement agreement with the Commission (signed on 30 January 2019 by Paramount and on 12 February 2019 by the Commissioner), which was placed before the Tribunal for confirmation. The Tribunal heard the matter on 13 March 2019 and on the same date issued an order confirming the settlement agreement (“annexure A”) as a Tribunal order under the relevant empowering provisions.

The general subject-matter of the dispute was the Commission’s allegation that multiple maize millers coordinated pricing and timing of price increases in respect of milled white maize meal for human consumption, and Paramount’s settlement of those allegations through an admission of liability, undertakings regarding future conduct and cooperation, and payment of an administrative penalty.

2. Material Facts

The court-record (consent agreement and Tribunal order) reflects that the Commission initiated a complaint on or about 14 March 2007 against several firms in the maize milling industry (initially including Tiger, Pioneer, Foodcorp, Pride Milling, and Progress Milling). The initiation was later amended to include additional firms, among them Paramount Mills (Pty) Ltd and various other millers identified in the settlement agreement. The complaint followed upon information obtained through corporate leniency applications submitted in 2007, first by Premier and subsequently corroborated by Tiger.

According to the Commission’s investigation findings recorded in the settlement agreement, at various stages during 1999 to 2007 the respondent firms were involved in price fixing in relation to white milled maize, including through meetings and telephone discussions in which agreements were reached concerning the prices of milled white maize products, the creation of uniform price lists, and the timing and implementation of price increases. The settlement agreement described these arrangements as operating at both regional and national levels and as mutually reinforcing.

In relation specifically to Paramount, the settlement recorded that during the relevant period Paramount’s representatives attended certain meetings and engaged in telephone discussions with competitors at which they agreed to directly fix selling prices, fix the dates on which agreed price increases would be implemented, and exchange information about pricing structures. The conduct was characterised in the settlement agreement as constituting price fixing and fixing of trading conditions prohibited under the Competition Act and as preventing and/or limiting price competition amongst the participating firms in relation to white maize meal products.

The settlement agreement further recorded corporate ownership facts concerning Paramount, namely that prior to 2013 JRB Investments Limited was the majority shareholder, and that on 28 August 2013 JRB Investments Limited sold a portion of its shareholding to Paramount Holdings Limited, a Bermuda-incorporated entity wholly owned by Seaboard Corporation (a Delaware-incorporated public company). The settlement agreement recorded that Seaboard Corporation and Paramount Holdings Limited had no interest in Paramount Mills prior to 28 August 2013, and included a statement that Seaboard Corporation did not admit liability for the collusive conduct on the basis that it was not a party to it and had no relevant interest during the period of the conduct.

As part of the settlement terms, Paramount confirmed that the prohibited conduct had ceased, undertook to cooperate with the Commission in the prosecution of remaining respondents, and agreed to implement internal compliance steps, including circulating a summary of the settlement to managers and directors, developing and monitoring a competition law compliance programme, and submitting such programme to the Commission within a specified period after Tribunal confirmation.

The settlement also fixed an administrative penalty calculated as 3% of Paramount’s affected turnover (defined as turnover for the sale of white maize meal for human consumption for the financial year ending in 2007), amounting to R1 320 819.00, payable partly within 10 days of confirmation and the balance in instalments up to the end of January 2020, with payment to be made into the Commission’s bank account for onward payment into the National Revenue Fund.

3. Legal Issues

The central legal question before the Tribunal was whether the Tribunal should confirm the settlement agreement concluded between the Commission and Paramount as an order of the Tribunal under the Competition Act, thereby giving it enforceable effect and concluding proceedings between these two parties in respect of the conduct covered by the complaint.

This was primarily a matter of the application of the statutory settlement/consent-order mechanism to the agreed facts and terms recorded by the parties. The underlying dispute concerned prohibited conduct (price fixing) which involves both legal characterisation and factual allegations; however, in these proceedings the material posture was shaped by Paramount’s admission of liability in the settlement agreement and the parties’ agreement on relief, rather than the Tribunal adjudicating contested evidence.

The Tribunal’s function in this posture was not framed in the order as resolving factual disputes on the merits, but as deciding whether to make the agreed settlement terms an order under the empowering provisions cited in the settlement agreement and reflected in the Tribunal’s confirmation order.

4. Court’s Reasoning

The Tribunal’s issued document was in the form of a confirmation order, stating that it confirmed the settlement agreement as agreed to and proposed by the Commission and Paramount, annexed to the order and marked “A”. The Tribunal’s order did not set out extended reasons.

From the structure of the order and the settlement documentation placed before it, the Tribunal proceeded on the basis of the statutory framework enabling the Tribunal to confirm a settlement (consent agreement) as an order of the Tribunal where the parties have reached agreement on liability and relief. The settlement agreement expressly recorded that the application was brought in terms of section 27(1)(d) read with sections 58(1)(a)(iii) and 59(1)(a) of the Competition Act 89 of 1998 (as amended), and the Tribunal’s confirmation reflected acceptance of that agreed procedural mechanism.

The confirmation had the effect of giving binding force to the settlement’s operative provisions, including Paramount’s admission of contravention of section 4(1)(b)(i), its future-conduct undertakings (cooperation and compliance programme obligations), and the agreed administrative penalty and payment terms. The Tribunal did not, in the text provided, engage in a separate evaluative discussion of penalty factors, but confirmed the penalty as agreed by the parties within the statutory penalty framework referenced in the settlement agreement (including references to sections 59(2) and 59(3)).

5. Outcome and Relief

The Tribunal confirmed the settlement agreement concluded between the Competition Commission and Paramount Mills (Pty) Ltd as an order of the Tribunal on 13 March 2019.

In consequence, the confirmed order incorporated the settlement’s substantive relief, including Paramount’s admission that it contravened section 4(1)(b)(i) of the Competition Act through collusive price fixing conduct (recorded in the settlement as occurring during 1999 to 2006), its undertakings to cease the conduct and implement compliance measures, its obligation to cooperate with the Commission in relation to remaining respondents, and its obligation to pay an administrative penalty of R1 320 819.00 (3% of affected turnover for the 2007 financial year) on the agreed payment schedule.

No separate costs order is recorded in the Tribunal’s confirmation order in the text provided.

Cases Cited

No cases are cited in the text provided.

Legislation Cited

Competition Act 89 of 1998 (as amended), including sections 4(1)(b)(i), 19, 26, 27(1)(d), 49B(1), 58(1)(a)(iii), 59(1)(a), 59(2), 59(3), and 59(4).

Rules of Court Cited

No rules of court are cited in the text provided.

Held

The Competition Tribunal of South Africa confirmed, as an order of the Tribunal, the settlement agreement concluded between the Competition Commission and Paramount Mills (Pty) Ltd in relation to collusive price fixing conduct in the white maize milling market.

The confirmed settlement entailed that Paramount admitted a contravention of section 4(1)(b)(i) of the Competition Act, undertook to cooperate with the Commission and implement internal competition law compliance measures, and became liable (on the terms agreed) for payment of an administrative penalty of R1 320 819.00, payable according to the schedule set out in the settlement agreement.

LEGAL PRINCIPLES

The Tribunal applied the statutory mechanism under the Competition Act 89 of 1998 permitting the Tribunal to confirm a settlement (consent agreement) as an order, thereby rendering the agreed obligations enforceable as a Tribunal order.

The settlement documentation reflects the application of the per se prohibition on price fixing under section 4(1)(b)(i) of the Competition Act to collusive arrangements involving agreements on prices, the timing of price increases, and the exchange of pricing information in a manner that limited or prevented competition.

The settlement further reflects the framework for the imposition of an administrative penalty under the Competition Act (as referenced in sections 58 and 59), including that penalties may be agreed in settlement and, once confirmed, must be paid in accordance with the order and are payable over to the National Revenue Fund as contemplated in section 59(4).