Two firms fined for collusion in cleaning tender

Two companies that colluded and fixed the prices for their submissions for a tender for the provision of cleaning services to the Western Cape Department of Agriculture have been fined after admitting contravening the Competition Act and entering into settlement agreements with the Competition Commission. However, neither of the two companies was awarded the tender, which was won by the lowest bidder, Pronto Kleen Cleaning Services. The Competition Tribunal yesterday confirmed both settlement agreements.Zara Cleaning Services agreed to pay a fine of R167 242 and Top N Nos Services a fine of R36 935. The penalties represent 1 percent of the annual turnover of both firms for the year to February last year.

Matodzi Sivhaga, who was appearing for the commission, said the commission received a complaint in March 2014 from forensic investigation unit on behalf of the Western Cape department of agriculture against Pronto Kleen Cleaning Services, Zara Cleaning Services and Top N Nos Services for possible contraventions of the Competition Act. Sivhaga said the commission’s investigation revealed that Top N Nos Services and Zara Cleaning Services had agreed on how to price various items in the pricing scheduled which they submitted when bidding for this tender. Zara Cleaning Services and Top N Nos Services submitted pricing schedules to the department that contained prices for 43 items, which with the exception of two items differed by the same amount. In each instance, Zara’s prices were 20c lower than Top N Nos prices and their pricing schedules had the same format and wording, including incorrectly spelling “Total” as “Toal”.

Mfundo Ngobese, also from the commission, said a document was leaked by an employee of the department but they did not know if it was leaked to all three firms or leaked to one firm, which then shared it with the others. However, Ngobese said there was no evidence that Pronto Kleen Cleaning Services participated in the collusion and price fixing by Zara and Top N Nos Prices. Sivhaga agreed with the tribunal that a penalty of 1 percent of annual turnover was at the lower end of the scale of penalties but imposing a penalty of closer to 10 percent of annual turnover would have wiped out the net income before tax of both companies. Wayne Hufkie, an attorney representing both Zara and Top N Nos Services, said both firms were relatively new and small and would not have been able to trade further if a larger fine was imposed.

Hufkie said Zara was the bigger company and had about 300 employees at the time the tender was submitted while Top N Nos Services had about 100 employees. But Hufkie said both firms had been blacklisted by the Western Cape provincial government and their business had declined as a result of not getting this government work. He said the firms had attempted to source work in the private sector but has not been as successful as they had relied on getting work from the provincial government. Hufkie added that both firms had not familiarised themselves with competition law and he had explained to them that ignorance of the law was no excuse. He said both of the companies had undertaken to comply with the relevant legislation and taken steps to ensure they did not contravene the law in the future. There was no evidence that Pronto Kleen participated in the collusion and price fixing.