NYK Agrees To Pay R104 Million In Settlement Agreement

On 1 June 2015, it was announced that Japanese Shipping liner, NYK, had concluded a settlement agreement with the Competition Commission (the “Commission”) in the amount of R104 million (approximately $8 600 000), for contravening Sections 4(1)(b)(i),(ii) and (iii) of the Competition Act (“Competition Act”), 89 of 1998.

The listed sections relate to collusive conduct, including:

• directly or indirectly fixing a purchase price or other trading condition;
• dividing markets by allocating customers, suppliers or territorial or specific types of goods or services; and/or
• collusive tendering.

The settlement follows an investigation by the Commission into the collusive behaviour of a number of shipping liners, namely Mitsui O.S.K Lines; Kawasaki Kisen Kaisha Ltd; Compania Sud Americana de Vapores; Hoegh Autoliners Holdings AS; Wallenius Wilhelmsen Logistics; Eukor Car Carriers; and NYK, in relation to allegedly fixed prices, divided markets and tendering collusively in respect of the provision of deep sea transportation services.

In terms of Competition Act, a settlement agreement must be made an order by the South African Competition Tribunal. The Order will of course also be made public.

It will be interesting to note that the new guidelines recently adopted by the Competition Commission, on the Calculation of Administrative Penalties is still relatively novel, and it will be interesting to see how and to what extent the Commission followed the Guidelines in reaching the settlement quantum.  As AAT has written previously on the topic:

The Guidelines set out a six step process to be used by the SACC  to calculate administrative penalties. The six steps are summarised below:

1. An affected turnover in the base year is calculated;
2. the base amount is a proportion of the affected turnover ranging from 0-30% depending on the type of infringement (the higher end of the scale being reserved for the more serious types of prohibited conduct such as collusion or price fixing);
3. the amount obtained in step 2 is then multiplied by the number of years that the contravention took place;
4. the amount in step 3 is then rounded off in terms of Section 59(20 of the Act which is limited to 10% of the firms turnover derived from or within South Africa;
5. the amount in step 4 can be adjusted upwards or downwards depending on mitigating or aggravating circumstances; and
6. the amount should again be rounded down in accordance with Section 59(2) of the Act if the sum exceeds the statutory limit.

It is important to note in the case of bid-rigging or collusive tendering, the affected turnover will be determined by calculating the value of the tender awarded. Thus, even where a firm deliberately ‘loses’ a tender, the firm will be subjected to an administrative penalty which calculates the value of the tender in the hands of the firm who ‘won’ the tender.