South Africa: Competition Tribunal dismisses cartel complaint despite settlements by other respondents

On 15 January 2019, the South African Competition Tribunal (“Tribunal”) dismissed the Competition Commission’s (“Commission”) cartel complaint against Tulisa Cables. Tulisa Cables was one of four respondents to the Commission’s complaint referral.

The other respondents included Aberdare Cables who approached the Commission for leniency and Ocean Electric Wire Company and Alvern Cables who both concluded settlement agreements with the Commission (the latter concluded a settlement agreement on the first day of the hearing before the Tribunal). Alvern paid an administrative penalty of R4.7 million which equated to 5% of its total turnover for 2010. Ocean Wire paid an administrative penalty of approximately R13.3 million.

Tulisa, as the only remaining respondent, opposed the Commission’s complaint referral.

The Commission alleged that for a period between 2001 and 2010, the respondents attended meetings and engaged directly with each other to, inter alia, discuss the price of power cables. Furthermore, that Aberdare would circulate price lists to the respondents and that this constituted a concerted practice between the respondents to fix prices as it was common cause that all the respondents based their own prices off Aberdare’s price lists (which were circulated monthly). The first allegation was therefore that a collusive “agreement” had been reached by the respondents, and secondly that there was a concerted practice between the respondents which amounted to collusive conduct.

Tulisa denied attending meetings as alleged by the Commission. Based on the evidence, the Tribunal found that there was insufficient proof of an agreement having being entered into between Tulisa and the other respondents to collude.

In relation to the concerted practice allegation, Tulisa argued that Aberdare’s price lists were circulated to it via its customers and not directly by Aberdare. Furthermore, Tulisa  argued that it used Aberdare’s price lists to discount off Aberdare’s prices.

Michael-James Currie, a competition lawyer practicing in sub-Saharan Africa says that Tulisa appears to have adopted a “follow the leader” pricing strategy so as not to potentially be undercut by the largest player in the market (Aberdare) were Tulisa to make the first move (from a pricing perspective).

John Oxenham, director of Primerio, says that the Tribunal found that in light of the evidence and the market structure Tulisa’s explanation for its pricing strategy is a plausible one – particularly in oligopoly markets.

Both Currie and Oxenham agree that there are a number of markets in South Africa where “conscious parralism” may be particularly prevalent due to the size of the domestic market. Provided, however, that the market structure and conduct of the players in those markets does not compromise their independent decision, there are ordinarily limited concerns regarding anti-competitive effects in the market. In this regard, Currie points to the following paragraph of the Tribunal’s decision which succinctly summarises the issue as follows:

Tulisa’s actions appear to be consistent with those of a player in an oligopoly market acting rationally and independently of its competitors but well alive to the  actions  of  the  competitors  (referred  to  in  literature  and  case  law  as ‘conscious  parallel  behaviour’  or  ‘conscious  parallelism’).  It is generally accepted that conscious parallel pricing is unlawful if it is the result of a collusive arrangement but is lawful if it is unilateral as a consequence of the market structure. Where the line is drawn between the two is a matter of fact and evidence.

To access the full judgment click here.

 

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