SA: Construction firms come forward with evidence of anticompetitive behaviour
South Africa's increasingly assertive competition watchdog, the Competition Commission, has confirmed receipt of applications for ‘corporate leniency' from companies operating in the construction sector as its investigation into the industry heats up.
This implies that companies that have knowingly engaged in anti-competitive behaviour are ready to offer insight that could lead to prosecutions under the Competition Act.
In a presentation to Parliament's portfolio committee on Trade and Industry on Friday, Commissioner Shan Ramburuth reaffirmed that the commission was investigating possible collusive behaviour in the construction-materials and -services sectors, including the possibility of bid rigging.
He noted that there was "wide concern" about high prices in building materials, such as cement, bricks, aggregates and steel, where price trends were substantially above inflation.
Ramburuth also reaffirmed that its investigations into the sector had been given added impetus by the fact that government was in the midst of a R500-billion-plus public investment programme, where there was a desire to ensure that prices were not placed under upward pressure by collusive practices.
In recent months, the commission had taken a far more proactive approach to specific economic sectors, particularly those where collusive behaviour impacted either the poor, or had the potential to undermine government's industrial and economic development aspiration.
To this end, the commission was homing in on agroprocessing, specifically food processing and forestry; intermediate industrial products, such as chemicals and steel; infrastructure and construction, including bid rigging; and the financial sector, specifically banking.
Ramburuth's revelation that companies in the construction sector had applied for corporate leniency - a process whereby firms could receive indemnity from prosecution for providing information on a cartel, as long as they were ‘first through the door' - follows similar processing relating to the bread, milk and pharmaceutical cartels.
In the highest profile of these cases, relating to bread, Tiger Brand, which had applied for corporate leniency, had already been fined R98-million, and there were cases pending against the other offenders that did not cooperate.
A trial date had been set for the Western Cape bread cartel against Pioneer; while cases against Pioneer and Foodcorp relating to a national bread cartel would be referred shortly. Eleven respondents were currently being investigated with regards to a so-called national milling cartel.
CONSTRUCTION IN FOCUS
The commissioner's presentation also came only a day after South Africa's leading construction company Murray & Roberts said it would adopt a "proactive" policy of engagement with the commission in its probe of possible anticompetitive practices in the construction industry.
In fact, CEO Brian Bruce indicated that it was dealing with requests for information from the Competition Commission and that it would not be a "defensive player" in the unfolding processes. He refused, though, to be drawn on whether this engagement could result in an application for corporate leniency, saying only "we are going to be proactive".
It emerged previously that the commission had set up a sizable multidisciplinary team to review the construction-materials and -services sector as a precursor to a full-scale investigation into possible anticompetitive practices in the industry.
Major areas of concern identified related to consistently high rates of price increases for many products, such as bricks, aggregates, cement and reinforcing steel; high levels of concentration and barriers to entry in the construction-materials market; and significant transport costs, which lowered the threat of import competition.
The commission was also concerned about the high levels of concentration in the construction-services sector, and the opportunity this offered for bid rigging.
