Commission slams cable cartel

2014-11-16 15:00

The competition commission is alleging that a cartel in the electric power cables market was in operation for more than 12 years.

The alleged cartel, run through the industry association, was allegedly involved in collusive behaviour on low- and medium- voltage power cables.

Low-voltage power cables are used in the home and office to power devices like computers, stoves, fridges and washing machines, and also in extension cables.

Medium-voltage cables are used to carry electricity from the grid to a house or factory, and are generally associated with bulk power supplies. Typical consumers would be big industry, municipalities and power utility Eskom.

The commission says the case it has referred to the competition tribunal relates to the retail market and that its investigation into collusive behaviour in the tender market is still proceeding.

The commission alleges a pricing formula used by the industry association to calculate monthly future prices of power cables – based on indicators of inputs such as copper, lead, aluminium, fully galvanised wire, polyethylene, rubber and silicone, among other materials – was used to fix power cable prices.

The commission argues in its referral affidavit that members of the industry body, the Association of Electrical Cable Manufacturers of SA (AECMSA), agreed to use the prices generated by this formula to give quotes to customers – in effect, fixing the price each month.

AECMSA would distribute these prices to members in monthly “quotation base circulars”.

The commission’s referral affidavit reads further: “The circulars expressly stated that all members of the association agreed to quote on the basis of a particular price in a particular month. This express agreement was recorded in all quotation base circulars from its inception until September 2008 when the association obtained legal advice that their conduct might contravene the Competition Act.

“Subsequently, the association removed from the circulars the sentence which stated that ‘all members of the association have agreed that for [month and year] members are quoting on the basis of…’” reads the referral affidavit.

“Notwithstanding the removal of the phrase, the conduct of the association and the cable manufacturers remained the same as set out above.”

The commission alleges the association continued with the practice until August 2012, four years after receiving the legal advice that it might be in contravention of the Competition Act.

This week, the commission referred its case against 12 power cable manufacturers and the industry association to the tribunal.

It had been investigating the sector since March 2010 and was initially focused on four manufacturers, but by May 2010, it had amended its complaint to include eight other manufacturers and the industry association.

The 12 manufacturers named in the referral affidavit are Alvern Cables, South Ocean Electric Wire Company, Tulisa Cables, Alcon Marepha, CBI-electric: African Cables, Phoenix Power Cables, Cabcon Technologies, Silcom, Malesela Taihan Electric Cable, Norco Cables, Kewberg Cables & Braids, and Aberdare Cables.

Aberdare was granted conditional corporate leniency in March 2012 and is helping the commission in the prosecution of the other alleged cartel members, so is not potentially facing a fine.

Altron group legal manager Chris Potgieter, responding on behalf of Aberdare Cables, said: “Aberdare will continue to cooperate with the commission and, accordingly, expects to get full immunity and no penalty in relation to the matter.”

Norco’s Jan du Plessis said it was a general practice to escalate prices based on metals, which are determined monthly by PricewaterhouseCoopers on behalf of AECMSA for use in medium- and long-term quotations.

Silcom’s Sander Silvis said the company manufactured communication cables and not power cables. He said he joined AECMSA in 2009 and left in 2011. During his time, there were never any discussions about price-fixing or market manipulation.

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