Power cable producer Alcon Marepha admits collusion

Empowered power cable producer Alcon Marepha, which was created through a joint venture with Aberdare, was compelled by the shareholder agreement between the two companies to submit all its tenders, investments and expansion to its product range for approval to Aberdare.

Edwin Phala, the chief executive of Alcon, confirmed this yesterday at a Competition Tribunal hearing on an application by the Competition Commission for the approval of a consent agreement that it had reached with Alcon. Phala said Aberdare had previously declined a proposal by Alcon to buy out their 49 percent shareholding in the joint venture and only agreed to it when the commission's investigation took place.

“We had to pay them to buy the other 49 percent. That allowed us to start growing the business, including entering other product lines and creating 16 more jobs in the company,” he said. In terms of the agreement, Alcon admitted it entered into a collusive agreement with its competitors and agreed to pay a fine of R1.37 million, which amounts to 1.5 percent of Alcon’s turnover in its 2010 financial year.

The tribunal has not yet confirmed the consent agreement. Fhatuwani Mudimeli, appearing for the commission, said the commission initiated a complaint in March 2010 against Aberdare, Tulisa Cables, Alvern Cables and South Ocean for possible contraventions of the Competition Act in the market for the supply of power cables to wholesalers, distributors and contractors.

Mudimeli said the commission obtained further information during a search and seizure raid on the premises of these entities in May 2010 that suggested other parties may be involved in collusive conduct in other markets. This resulted in the commission expanding its investigation to include Alcon and other power cable suppliers and the Association of Electric Cable Manufacturers South Africa in the tendering market.

Mudimeli said this investigation found that from 1994 to at least 2010, Alcon, African Cables, Aberdare and M-Tech entered into agreements to tender collusively for Eskom tenders for aluminium conductors and copper cable. “In terms of the collusive arrangements, these companies agreed to allocate specific power cable product lines and agreed on the price to be charged per product line.

“In addition, the commission found the members of the association discussed and agreed under the auspices of the association on a quotation basis which was used to escalate prices when bidding for short- and long-term tenders to supply electric cable products to customers such as Eskom and municipalities,” he said.