Cracks appear in glass cartel

2013-06-16 14:00

Another firm cooperates with competition commission and will testify about ‘boys’ club’

Another week, another cartel.

This week another member of an alleged glass cartel operating in Gauteng, Free State and Western Cape broke ranks and cut a deal to cooperate with the competition commission.

McCoy’s Glass will pay a reduced fine of just under R2.5?million and will testify about the “boys’ club” of six glass manufacturers and distributers: Glass South Africa, National Glass, Northern Hardware & Glass, Furman Glass, AF-FSL Glass and McCoy’s itself.

The commission originally referred its findings of cartel conduct against the companies in April this year, following an investigation started in 2010, after receiving information from lenient applicant AF-FSL Glass.

AF-FSL was granted conditional leniency from prosecution.

The six firms are all facing allegations of price-fixing, market allocation and the fixing of trading conditions for float, laminated and toughened glass.

Float glass is used for windows, while laminated glass is a type of safety glass used in automobile windscreens and skylight glazing.

Toughened glass crumbles into granular chunks and is unlikely to cause injury when broken, and is as such used in passenger-vehicle windows, shower doors, refrigerator trays, and various types of plates and cookware.

The cartel activity allegedly occurred between 1993 and 2007, and the commission alleges cartel members had telephonic conversations and held various meetings which they referred to as the “boys’ club”.

These meetings took place on the first Monday of the month and were later held every two to three months.

At these meetings, the accused companies allegedly fixed minimum selling prices, the percentage by which minimum prices would increase and the date for the implementation of the fixed prices. The cartel members divided markets by agreeing not to undercut one another to gain customers.

The meetings were held at hotels, pubs, sports clubs and on boat trips in Zimbabwe.

The commission has asked the tribunal to impose an administrative penalty of 10% of annual turnover on each of the remaining firms involved that have not settled. McCoy’s reduced fine is 3% of its 2011 turnover.

At the competition tribunal hearing for McCoy’s Glass this week, founder Steve McCoy testified that when he was invited to the first meeting in 1998, he had no idea it was a cartel.

McCoy began operations in 1995 and this week he admitted to feeling quite flattered and important at being invited.

“I was 28, selling glass out of the back seat of my car. I didn’t know the industry was a cartel and that it was wrong.”

In 2007 McCoy got word that a price increase was coming from the manufacturer and the cartel participants wanted to discuss how the industry would treat the increase.

McCoy didn’t trust the company – a subsidiary of the manufacturer – that told them about the price increase, so he approached the manufacturer directly, which said they didn’t know anything about a price increase.

At that point he lost trust in the cartel and never went back, he says.

The other alleged cartel members were contacted for comment, but did not respond before going to print.

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