THE Competition Commission has showed its teeth in prosecuting big businesses for major contraventions of the competition rules this year.
The largest penalty yet imposed by the competition authorities on a firm in the steel industry, for contravening the Competition Act and in the beverages sector, resulted in arguably the most far-reaching public interest conditions attached to mergers yet. There has also been a sharp increase in the number of cartel investigations, the latest annual report shows.
The ArcelorMittal SA case was a highlight for the commission in which the biggest penalty ever was imposed in SA for contravening the act. The agreement settled four complaints of collusion, information exchange and excessive pricing against ArcelorMittal for conduct that took place in the long steel, scrap metal, flat steel and wire mesh markets from at least 2003 to the time of the settlement.
However, it was not the amount of the penalty that made the commission’s settlement with ArcelorMittal significant, the regulator said. It was the far reaching and creative remedies the commission and ArcelorMittal agreed upon.
As part of the settlement, ArcelorMittal undertook to limit its EBIT (earnings before interest and tax) margin to a cap of 10% for flat steel products sold in SA over five years.
It committed to R4.6bn capital expenditure over the next five years. “The full impact of this settlement will only be felt by the steel industry in the coming years. We are confident that it will lead to a reduction in pricing and improvement in the overall competitiveness of this priority industry,” the regulator said.
Food and agro-processing, healthcare, construction and infrastructure, banking and financial services, information and communication technology and energy, were among the priority sectors targeted by the commission.
The regulator’s mergers and acquisitions division said that its success rate this year had been 100% of its performance targets A total of 48 403 jobs were saved by the commission’s intervention while 15 mergers were approved with public interest conditions.
Seema Nunkoo, acting manager of the M&A division, said it had initiated 26 cartel investigations this year, completed 33 – including some that were carried over from last year – and referred 27 cases to the tribunal for adjudication. Makgale Mohlala, managing the cartels division, said that the biggest challenge was the case load. “By the end of the financial year, the commission had 98 cases in litigation,” he said.
A case worthy of mention by the regulator is the referral against Stuttafords Van Lines of 649 counts of collusion on office furniture removal tenders issued by various government departments and institutions.
This is the most number of charges of collusion faced by any single firm in the history of South African jurisprudence. SA businesses have been warned to toe the line or deal with the full might of the law.