Industrial and speciality gas manufacturer and supplier Air Products South Africa has agreed to pay an administrative penalty of about R2.76-million to South Africa’s competition authorities.

This was part of a settlement agreement with the Competition Commission, in terms of which Air Products admitted that its agreement with Sasol Chemical Industries had given rise to price fixing and market allocation, resulting in the prevention of competition in the industrial gases market.

The penalty represented 1.5% of Air Products’ 2011 turnover derived from its liquid nitrogen (LIN) and liquid argon (LAR) products.

Sasol applied for, and was granted, conditional leniency in March 2009. This consent agreement followed a complaint initiated by the commission in September 2009.

The leniency application indicated that Air Products had reached an agreement with Sasol, which limited the extent to which the two firms could compete in the supply and marketing of gas products. 

The commission conducted its investigation and found that, during 1998, the two firms entered into a suite of agreements in relation to the supply and marketing of specialty gases. 

The agreements included a cooperation agreement, which regulated the cooperation between Air Products and Sasol in the marketing of surplus gaseous nitrogen (GAN), gaseous oxygen (GOX), and LAR and LIN from the Sasol One Oxygen plant; and a supply agreement, which regulated the supply of GAN, GOX, back-up LIN and liquid oxygen (LOX) from Air Products’ Vanderbijlpark plant to the Sasol One Oxygen plant using pipelines owned by Sasol.

It further included a management agreement, which regulated the management, operation and maintenance of the Sasol One Oxygen plant by Air Products; and a utilities and services agreement, which regulated the supply of certain utilities and services such as power, water, hydrogen and steam by Sasol to Air Products at the Sasol One Oxygen plant.

These agreements came into effect on April 4, 1998, and were set to expire in April 2013, unless terminated by mutual consent.

The commission found that Air Products and Sasol were competitors in the supply of LAR, LOX, LIN, GOX and GAN, as they were, and continue to be, independent producers of these products and both have plants that have the capacity to produce these specialty gas products. 

In addition to the penalty, Air Products agreed to abstain from all anticompetitive conduct, and to develop, implement and monitor a competition law compliance programme incorporating corporate governance, designed to ensure that its employees, management, directors and agents do not engage in future contraventions of the Competition Act.

Air Products further agreed to amend the suite of agreements in conjunction with Sasol to remove the anticompetitive restrictions.