agriculture, BRICS, cartels, South Africa

Pistorius family embroiled in Ag price-fixing cartel

The Pistoriuses refuse to stay out of the media (Ag-)limelight

Starting in late 2009, the South African Competition Commission had suspected cartel activity in the Agricultural Lime (“AgLime”) industry.  Notably, one of the participants in the alleged price-fixing scheme was the Hendrik Pistorius Trust and its Pistorius-family trustee members, all of whom are respondents (defendants) in the action now referred by the CompComm to the S.A. Competition Tribunal (official referral document here).

The connection of this antitrust case with now-infamous Olympic runner Oscar Pistorius is obviously only a family link (based on some quick research, it seems as though one of Oscar’s cousins is involved, namely Arnoldus Pistorius, the son of yet another respondent, Leo Pistorius who is apparently known as an elephant hunter).

It is interesting to note that the Commission requests a 10% penalty, however, they do not explicitly state that it is for the period of the contravention (page 10).

On 16 January 2015, the South African Competition Commission filed a complaint against Hendrik Wilhelm Carl Pistorius N.O., Leo Constantin Pistorius N.O., Hermine Pistorius N.O., Arnoldus Kurt Pistorius,  Kalkor (Pty) Ltd, CHL Taljaard & Son (Pty) Ltd, PBD Boerdedienste (Pty) Ltd, Grasland Ondernemings (Pty) Ltd and Fertiliser Society of South Africa.

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The Commission alleges that the respondents were engaged in a prohibited practice from 1995 until 2008, by agreeing or entering into a concerted practice to fix the commissions payable by each of them to fertiliser companies who employ agents to market, sell and distribute agricultural lime, which is crushed / pulverised limestone or dolomite used for soil treatment in order to reduce the acidity of the soil.  This alleged practice is in contravention of section 4(1)(b)(i) of the South African Competition Act, which provides the following:

An agreement between, or concerted practice by, firms, or a decision by an association of firms, is prohibited if it is between parties in a horizontal relationship and if –

(a) it has the effect of substantially preventing, or lessening, competition in a market, unless a party to the agreement, concerted practice, or decision can prove that any technological, efficiency or other pro-competitive gain resulting from it outweighs that effect; or

(b) it involves any of the following restrictive horizontal practices:

(i) directly or indirectly fixing a purchase or selling price or any other trading condition;

(ii) dividing markets by allocating customers, suppliers, territories, or specific types of goods or services; or

(iii) collusive tendering.

 

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cartels, collusion, criminal AT, South Africa, Uncategorized

South Africa- Competition Commission conducts third dawn raid this year

south_africa

Ending off a year of numerous dawn raids, the Commission announced yesterday in a press statement that it had conducted a search and seizure / dawn raid operation at the offices of InvestChem (Pty) Ltd (“InvestChem”) and Akulu Marchon (Pty) Ltd (“Akulu Marchon”) in Kempton Park, Johannesburg. The firms manufacture and supply a range of surfactant products. Surfactants may act as detergents, wetting agents, emulsifiers, foaming agents, dishwashing liquids, soaps, car cleaning products and dispersants.
InvestChem is the South African subsidiary of Inchem Holdings Ltd, which is a Bermuda-based company which has other subsidiaries based in the USA and Portugal. InvestChem develops, manufactures and supplies a range of surfactant products which are used in the detergent and toiletry industries.
Akulu Marchon, which is one of the businesses of AECI Chemicals, supplies chemical raw materials for cosmetics, toiletry and detergent products in Southern Africa. These products include petroleum jelly and white mineral oils for the South African ethnic skin and hair care markets, locally produced and imported specialty surfactants for household, personal care products and chemical specialties for the personal care and cosmetic industries.
The Commission indicated that the dawn raid formed part of the Commission’s ongoing investigation into collusive conduct in the market for the production and supply of a range of surfactants products used as input materials in the manufacture of blended household detergents, cosmetics and toiletry products.
According to the Commission, from 2003, the parties held meetings and agreed to fix the prices for surfactants and allocated customers between each other which is prohibited by the South African Competition Act and the Commission understands the alleged conduct is currently ongoing.
The Commissioner, Tembinkosi Bonakele stated the following in relation to the dawn raid, “I believe that the information that will be obtained from today’s operation will enable the Commission to determine whether or not the parties have indeed engaged in collusive conduct. However, as part of any investigation, we also wish to urge anyone, be it business or individuals with further information to come forward and assist the Commission in concluding this investigation”.
Following a four year dawn raid “drought”, the Commission had conducted a dawn raid in July 2014 at the offices of Precision and Sons (“Precision”), Eldan Auto Body (“Eldan”) in Pretoria West, as well as the Vehicle Accident Assessment Centre (“VAAC”) in Centurion. Precision and Eldan’s business activities include panel beating, spray painting and towing of vehicles and they are approved auto body repairers to Original Equipment Manufacturers. In April 2014, the Commission conducted a dawn raid at the offices of Unilever South Africa (Pty) Ltd and Sime Darby’s respective South African offices, in relation to the Commission’s investigation into alleged collusive conduct in the product markets for the manufacture and supply of edible oils and baking fats to both wholesale and retail customers.

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BRICS, cartels, collusion, South Africa

(Belated?) auto-parts cartel allegations sweep S. Africa

south_africa

Following late on the heels of years-old international auto-parts collusion investigations, ZA Competition Commission issues press release

In its press release, the Commission quotes Thembinkosi Bonakele as saying that his agency’s “investigation into this pervasive collusive conduct joins similar investigations launched in other jurisdictions internationally” and states:

The information in the possession of the Commission suggests that from 2000 to
date, 82 automotive component manufacturers have colluded in respect of 121
automotive components. The 121 automotive components affected by the collusion
include, but not limited to, Inverters, Electric Power Steering ECU, Electric Power
Steering and Motors, Glow Plugs, Electric Power Steering systems, Rear
Sunshades, Pressure Regulator, Pulsation Damper, Purge Control Valves,
Accelerator Pedal Modules, Power Management Controller, Evaporative Fuel
Canister systems, Knock Sensors, Spark Plugs and Clearance Sonar systems.

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cartels, collusion, dominance, draft, East Africa, Kenya, legislation, leniency / amnesty, Media, Telecoms, Uncategorized

Kenya competition landscape active

kenya

Zuku pay-TV launched complaint against DStv in Kenya

As we reported in “Your Choice“, MultiChoice has been an active (if unwilling) player in African antitrust news.  Zuku pay-TV has recently requested the Competition Authority of Kenya (CAK) to impose a financial penalty on DStv for refusing to re-sell some of its exclusive content like the English Premier League to its rivals.

In its letter to the CAK, Zuku pay-TV accuses MultiChoice, the owners of DStv, of abusing its dominance and curbing the growth of other, competing pay-TV operators. Furthermore, Zuku pay-TV requested the CAK to compel DStv to re-sell some of its exclusive content and impose a financial penalty, which can be up to 10 per cent of a firm’s annual sales, on the South Africa firm. According to Zuku pay-TV, DStv has a market share of 95% in Kenya.

The CAK has not indicated whether it is investigating the complaint yet.

Mr Wang’ombe Kariuki, director of the CAK
Kenya to get leniency policy

In addition to the ongoing pay-TV antitrust dispute, the CAK has drafted a law (the Finance Bill of 2014) which will create a Kenyan cartel leniency programme in order for whistleblower companies and their directors to get off with lighter punishment, for volunteering information that helps to break up cartels, as AAT reported here.

To recap the leniency programme will either grant full immunity for applicants or reduce the applicant’s fines, depending on the circumstances. The Finance Act 2014 is awaiting its third reading in Parliament.

The introduction of a leniency programme in Kenya is a pleasing sight due to leniency programmes’ proving to be an integral and vital tool for uncovering cartels in every jurisdiction in which it has been deployed.

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cartels, collusion, COMESA, criminal AT, Kenya, leniency / amnesty, new regime, Uncategorized

Antitrust amnesty: new regime to go online soon

kenya

Kenya to become latest competition jurisdiction with cartel leniency scheme

As Mugambi Mutegi of the Business Daily reports, Kenya is the latest antitrust jurisdiction to embrace a self-reporting leniency programme.

Mr Wang’ombe Kariuki, director of the CAK

Self-reporting of “hard-core” competition-law offences (such as price-fixing cartel conduct, market division, bid rigging, or group boycotts among horizontal competitors) has long been a staple of antitrust enforcement in the most developed jurisdictions, including the United States and the European Union.  In South Africa, cartel-whistleblowing leniency has just passed its 10th anniversary, and in the EU, the European Commission’s “Notice” on the non-imposition of fines in certain cartel cases (i.e., the EU’s leniency regime) recently celebrated its 18th birthday — nowadays, more than 75% of the EC’s cartel matters are uncovered thanks to one or many cartel members “snitching” on their counterparts, in exchange for full or partial amnesty from antitrust prosecution and attendant fines.

The Competition Authority of Kenya (CAK) has recently upped its rhetoric, threatening criminal sanctions against various business sectors’ potential cartel members and disputing jurisdiction of the multi-national, but still feeble, COMESA competition authority in merger cases.

In Africa, Kenya (AAT archive on CAK issues here) is now becoming a new member of the “Leniency Club”, rewarding whistleblowers with eased penalties for volunteering relevant tips and information on the workings of the cartel.  The CAK is acting to implement the provision of the Kenyan Finance Bill 2014, which allows it to terminate cartel investigations with lighter punishment for whistleblowers, all the way to a full pardon.

“The Authority (CAK) may operate a leniency programme where an undertaking that voluntarily discloses the existence of an agreement or practice that is prohibited by the Competition Act and co-operates…in the investigation of the agreement may not be subject to all or part of a fine…”

The agency’s web site — which otherwise (unusually) refers to the Business Daily article quoted here, instead of issuing its own press release — tersely provides as follows:

Cartel firms get amnesty in new CAK regulation

The competition regulator has drafted a law that will see whistleblower companies and their directors get off with lighter punishment for volunteering information that helps to break up cartels.

The Competition Authority of Kenya (CAK) says introduction of this law, which is already in the Finance Bill 2014, will attract informers that can help to bust unlawful business agreements between cartels and other secretive pacts that facilitate anti-competitive behaviour.

Whistleblowers whose evidence leads to the successful termination of such agreements and punishment (fines and jail sentences) of the participants will either get reduced fines or full pardon.

The CAK’s Director General, Francis Wang’ombe Kariuki, is quoted as saying that the authority’s is merely awaiting Parliament’s amendment of the law, and that “[t]he settlement policy we have drafted includes offering leniency to the directors of companies who come forward individually or as a group to report on cartels or unlawful business pacts“.

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cartels, collusion, South Africa

Dawn raids, early in the morning

south_africa

Auto-body repair centres raided by SACC

Earlier this morning, the South African Competition Commission (“Commission”) has conducted dawn raids at the offices of Precision and Sons (“Precision”), Eldan Auto Body (“Eldan”) in Pretoria West, as well as the Vehicle Accident Assessment Centre (“VAAC”) in Centurion.

Precision and Eldan’s business activities include panel beating, spray painting and towing of vehicles. Precision is an approved auto body repairer to Original Equipment Manufacturers (“OEMs”) such as Cadillac, Dodge, Chrysler, Fiat, Kia, Chevrolet, Toyota and Honda, while Eldan is an approved auto body repairer to OEMs such as Jeep, Fiat, Mitsubishi, Toyota, Honda and Nissan.

The VAAC is an assessment centre which renders vehicle assessment services to customers of both Precision and Eldan.

The Commission has indicated that the dawn raid operation forms part of its ongoing investigation into collusive conduct in the market for auto body repairs. The Commission has also indicated that it has reasonable grounds to believe that information relevant to this investigation is located on the premises of the two companies.

Sections 46 to 49A of the South African Competition Act of 1998 (“Competition Act”) empowers the Commission to conduct surprise search and seizure visits and to carry out so-called “dawn raids” to a firm’s business premises in order to inspect documents and interview staff where an infringement of competition law is suspected.

The Commission is empowered to enter any such premises when a judge or a magistrate has issued a warrant. Although a warrant is usually an essential requirement to ensure that a dawn raid is conducted in accordance with the law, the Competition Commission does have the power to enter and search a premises without a warrant, in exceptional circumstances. The Commission has confirmed that it has duly obtained the warrants which authorise it to search the offices of Precision, Eldan and VAAC from the North Gauteng High Court.

If the Commission has reason to believe that a firm is in contravention of provisions of the Competition Act, or is in possession of information relating to a matter that is under investigation, the Commission’s investigators have the authority to enter into the firm’s premises in order to inspect and request copies of documents, ask for information in relation to any documents, take notes and interrogate employees, search and examine computer data and remove evidence from the premises. In particular, officials may examine files, reports and emails. The Competition Commission is entitled to confiscate computer hard drives. They may also take copies of documents.

Following a four-year dawn raid “drought”, the immediately-previous dawn raid initiated by the Commission had been conducted in April 2014 at the offices of Unilever South Africa (Pty Ltd) and Sime Darby’s respective South African offices, in relation to the Commission’s investigation into alleged collusive conduct in the product markets for the manufacture and supply of edible oils and baking fats to both wholesale and retail customers.

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AAT, BRICS, cartels, criminal AT, event, legislation, new regime, South Africa

Criminalisation of antitrust offences: not on short-term horizon

south_africa

Competition Commission not ready to pursue antitrust cases criminally – plus: AAT‘s recommendations

The newly (permanently) appointed Competition Commissioner, Tembinkosi Bonakele, has referred to a “phased” implementation of the 2009 Competition Amendment Act.  The legislation technically criminalised hard-core antitrust offences such as bid-rigging or price-fixing cartels.  However, it has not yet been implemented or effectively signed into law.

According to a MoneyWeb/ZA report, both he and his boss, Economic Development Minister Ebrahim Patel, had discussions on how and when to implement “to ensure that the necessary institutional capacity is available to apply the amendments.”  The initially effective provisions (relating to the SACC’s market-inquiry powers) went into effect last year, while the criminalisation provisions remain unimplemented.

In a somewhat remarkable and prudent self-assessment, the minister and SACC have now admitted that the Commission currently lacks “the institutional capacity needed to comply with the higher burden of proof in criminal cases,” according to the report.

One notable aspect of potential discord lies in not only in the different standard of proof in civil vs. criminal matters (“more probable than not” vs. “beyond a reasonable doubt”), but perhaps more importantly can be found on the procedural side, preventing rapid implementation of the law: There has been historic friction between various elements of the RSA’s police forces and (special) prosecutorial services, and the power to prosecute crimes notably remains within the hands of the National Prosecuting Authority, supported in its investigations by the South African Police Service.

Historical and Legislative Background – and a bit of Advice

Starting in the spring and summer of 2008, the rumoured legislative clamp-down on corrupt & anti-competitive business practices by the government made the RSA business papers’ headlines.

During a presentation I gave at a Johannesburg conference in September that year (“Criminalising Competition Law: A New Era of ‘Antitrust with Teeth’ in South Africa? Lessons Learned from the U.S. Perspective“), I quoted a few highlights among them, asking somewhat rhetorically whether these were the words of fearmongers or oracles?

  • “Competition Bill to Pave Way for Criminal Liability”
  • “Tough on directors”
  • “Criminalisation of directors by far most controversial”
  • “Bosses Must Pay Fines Themselves”
  • “New leniency regime to turn up heat on cartels”
  • “New era in the application of competition policy in SA”
  • “Likely to give rise to constitutional challenges”
  • “New Bill On Cartels is a Step Too Far”
  • “Fork out huge sums or face jail time if found guilty”
  • “Disqualification from directorships … very career limiting”

I also quoted international precedent-setting institutions and enforcers’ recommendations, all of which tended towards the positive effect of criminal antitrust penalties:

OECD, 3rd Hard-Core Cartel Report (2005):

  • Recommends that governments consider the introduction and imposition of criminal antitrust sanctions against individuals to enhance deterrence and incentives to cooperate through leniency programmes.

U.S. Department of Justice, Tom Barnett (2008):

  • “Jail time creates the most effective, necessary deterrent.”
  • “[N]othing in our enforcement arsenal has as great a deterrent as the threat of substantial jail time in a United States prison, either as a result of a criminal trial or a guilty plea.”

While the presentation contained a lot more detail, the key recommendations that I summarised would seem to continue to hold true today, and may serve as guide-posts for Commissioner Bonakele and the EDD ministry:

Cornerstones of a successful criminal antitrust regime
  • Crystal-clear demarcation of criminal vs. civil conduct
  • Highly effective leniency policy also applies to individuals
  • Standard of proof must be met beyond a reasonable doubt
  • No blanket liability for negligent directors – only actors liable
  • Plea bargaining to be used as an effective tool to reduce sentence
  • Clear pronouncements by enforcement agency to help counsel predict outcomes
Demarcation of criminal vs civil antitrust conduct in U.S.

Demarcation of criminal vs civil antitrust conduct in U.S.

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