Two firms fined for roof bolts cartel

The Competition Tribunal has imposed harsh penalties on two firms involved in the mining roof bolts cartel case. The Tribunal found that Dywidag Systems International (Pty) Ltd (DSI) and Videx Wire Products (Pty) Ltd (Videx) contravened the Competition Act by rigging an Anglo Platinum tender in 2004 and 2005. It imposed penalties of R1‚848‚301 and R4‚765‚502 on DSI and Videx respectively. These penalties are payable within three months of the Tribunal’s decision. Videx and DSI are both firms that supply steel roof bolts to the mining industry. These are used to provide roof and wall support in underground mines in order to prevent cave-ins and to keep a mine accessible over extended periods of time.

The Tribunal’s decision follows a hearing that took place between October 2011 and February 2012. Prior to the hearing‚ on 26 January 2009‚ the Competition Commission initiated an investigation against firms in the mining roof bolts industry after Murray and Roberts Limited filed a leniency application on behalf of RSC Ekusasa Mining (Pty) Ltd‚ which at that time was its wholly owned subsidiary. In its leniency application Murray and Roberts alleged that RSC Ekusasa‚ Aveng (Africa) Ltd t/a Duraset‚ DSI and Videx had engaged in collusive practices. The Commission investigated the allegations and later referred the case to the Tribunal. RSC Ekusasa received leniency from the Commission in exchange for its testimony against the remaining respondents. Aveng subsequently settled the case with the Commission and paid an administrative penalty of R21 million.

The Commission’s case before the Tribunal was that the four mining roof bolt firms had colluded around tenders and the allocation of customers. In its complaint the Commission suggested that the cartel may have existed since the 1990’s and continued until at least 2008. However the incidents the Commission referred to‚ in relation to Videx and DSI‚ were limited to the 2004 – 2006 period. The Commission specifically alleged‚ among other things‚ that:

• DSI and Videx rigged a bid in two reverse auction tenders put out by Anglo Platinum in 2004 and 2005;
• DSI was involved in an attempt to collude with Duraset in respect of allocating the business of Sasol and Xstrata;
• DSI and Videx were involved in an agreement to bid very low prices for a tender from Goldfields‚ in a bid to punish Duraset;
• Videx approached Duraset in an attempt to get an agreement on prices to be quoted for a tender put out by Lonmin in May 2004;
• Videx attempted‚ albeit unsuccessfully‚ to fix prices with RSC on a bid for a tender from Harmony in October 2005 so that Videx could win the bid;
• DSI and Videx attended a meeting in respect of an Anglo Coal tender in 2006 in which they allegedly agreed to collude and assist RSC to increase its margins at Anglo Coal.

The defence taken by DSI and Videx was two-fold. While they admitted many of the contraventions‚ they alleged that these practices ceased more than 3 years before the Commission initiated its case and that this was beyond the cut-off date allowed in the Competition Act for initiating complaints. The Competition Act states that complaints may not be initiated more than 3 years after the conduct has ceased. Hence‚ the respondents alleged‚ the Commission had no jurisdiction to bring these allegations against them. Secondly‚ in relation to the contravention involving Anglo Coal which was alleged to have occurred within 3 years of the initiations‚ Videx and DSI alleged that they were not involved and that‚ as a matter of fairness‚ this aspect of the Commission’s case was brought against them too late in the Tribunal’s proceedings.

The Tribunal found that‚ in respect of all but the Anglo Coal and the Anglo Platinum contraventions alleged‚ the Commission had not established that the effects of the collusive agreements subsisted beyond the cut-off date allowed by the Competition Act for initiating complaints. Regarding the allegation on the Anglo Coal contract‚ the Tribunal found that the Commission had attempted to bring the allegations too late in the Tribunal’s proceedings and without an adequate explanation. The Tribunal found that to allow this late submission would have been procedurally unfair to Videx and DSI. However‚ with respect to the Anglo Platinum contracts‚ the Tribunal found that the Commission presented sufficient evidence of a contravention. In this instance Anglo Platinum had set up an online reverse auction – a bid in which sellers of a product bid one another’s prices down – during 2004.

Steel prices had gone up in 2004 and the 4 respondents felt their profits had been eaten into by an inability to pass the price increases on to Anglo Platinum. Therefore instead of competing in the online reverse auction as Anglo Platinum had expected‚ the respondents got together and decided to rig the auction. They did this by each participating in the online auction but‚ unbeknown to Anlgo Platinum‚ simultaneously maintaining telephonic contact to ensure that each party was following the same script. The plan‚ which ultimately succeeded‚ was aimed at ensuring that each firm retained its existing business with Anglo Platinum but at higher prices in order to offset the squeeze on their margins. Some eight months after the first reverse auction‚ in 2005‚ Anglo Platinum attempted a second reverse auction and the respondents colluded successfully yet again.

The Tribunal concluded that‚ unlike the other incidents alleged by the Commission‚ the collusive effect of the respondents conduct in this regard subsisted beyond the cut-off date allowed by the Competition Act. Accordingly the Tribunal found that Videx and DSI had contravened the Competition Act by rigging the Anglo Platinum reverse auction in 2004 and 2005 and imposed administrative penalties on each of the remaining respondents.