Wire mesh companies fined R27 million

2012-05-08 14:22

Two wire mesh companies have been fined R27.2 million for price fixing and allocating customers, the Competition Tribunal said today.

Reinforcing Mesh Solutions (RMS) was fined R21.6 million for its participation in a cartel from 2004 to 2008.

Vulcania Reinforcing was ordered to pay an administrative penalty of R5.6 million for its involvement between 2006 and 2008.

An investigation was initiated by the Competition Commission, which received information from Murray and Roberts (M & R) about the cartel.

In a leniency application, M & R admitted its subsidiary, BRC Mesh Reinforcing, had participated in the cartel with RMS, Vulcania, and Aveng (Africa), trading as Steeldale Mesh.

M & R was granted conditional immunity from prosecution, provided it co-operated with the Competition Commission’s investigation.

Aveng settled its case in April and paid an administrative penalty.

The case was heard in February and March last year, with closing arguments in August.

During the hearing, it emerged that the cartel had operated from at least December 2001 under the auspices of the industry body, the SA Fabric Reinforcing Association (Safra).

A price, derived from a set formula, was discussed at Safra meetings.

Safra would then circulate a recommended price list to its members who would then adopt it. This enabled the firms to uniformly pass on input cost increases to customers.

The timing of such increases was vitally important, according to BRC.

The increases had to be implemented simultaneously, to avoid allowing customers to search for better prices.

Industry participants were informed in 2005 that their conduct could be anti-competitive, but maintained the status quo.

It was common knowledge that a cartel existed in this industry for some years. Steeledale and BRC earlier admitted to participating in it.

Vulcania admitted attendance at meetings with its competitors on several occasions.

But it denied that its actions amounted to an agreement to join the cartel, and so denied liability.

It said it had temporarily attended cartel meetings from 2006, but this was a sham calculated to make its competitors believe it was part of the cartel.

The Tribunal found that whether Vulcania’s participation was real or a sham, it protected Vulcania from potential competition.

To that extent, it had benefited from the cartel.

RMS admitted liability, but contended that it had no turnover in the relevant financial year and so no penalty could be levied on it.

But the Commission alleged that RMS had engaged in restructuring so as to avoid the penalty – an allegation which RMS rejected.

The Tribunal found it was entitled to consider the earliest preceding year of normal turnover to determine the appropriate penalty.

Wire mesh is used to reinforce concrete. Customers include construction firms and re-sellers of building projects.

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