The Competition Commission has referred a case of alleged price fixing and market division in the supply of diesel to the Competition Tribunal for adjudication and has called for the maximum penalties to be imposed on Chevron South Africa, Engen, Shell South Africa, Total South Africa, Sasol and BP South Africa.

The six companies are all members of the South African Petroleum Industry Association (Sapia), which the commission alleges was used as a key platform for the extensive exchange of commercially sensitive information.

Its probe, which began in 2009, indicated that the abuses started in the late 1980s, but continued, through Sapia, from 2005.

The referral concerned sales of diesel to commercial customers, such as farmers, the road freight industry, the transport industry, as well as fishing and mining companies.

However, the commission was also investigating possible contraventions of the Competition Act by the same companies in other product categories, including petrol, diesel, illuminating kerosene, heavy furnace oil, bitumen, liquid petroleum gas and lubricants.

The information allegedly exchanged included monthly sales volumes per product category, while defining groups of customers in each magisterial district.

“The information at this level of detail allowed the oil companies to closely track each other’s sales and to align their strategies in the market, eliminating competition between themselves,” the commission said in a statement.

It further added that the sharing of sensitive information enabled the respondents to divide markets by not entering, or competing for, certain geographic markets, or customer groupings where other oil companies were active.

The oil companies intended, the commission argued, to use the information exchanged to protect historically high profit margins.

Further, it was found that the companies used the Wholesale List Selling Price, published by the Department of Energy, as their list price, preventing competitive discounting off this benchmark.

“This conduct had a far-reaching effect given that commercial customers of diesel include farmers, the road freight industry, the transport industry, and the fishing and mining industries, amongst others,” the commission stated.

Competition Commission deputy commissioner Tembinkosi Bonakele told Engineering News Online that the impact also affected consumers more generally, as commercial diesel is an input in many other products. He said the abuse would have affected the price of food and various consumer products used on a daily basis.

The investigation also uncovered that regulation of the industry was influenced, while the entry of new companies into the market was undermined to maintain the status quo.

The commission was proposing that the companies be fined 10% of turnover in exports from South Africa in the preceding financial year.

“The way penalties are getting calculated now, it is probably going to be the commercial diesel sales multiplied by the number of years the contravention took place. We will certainly go for the maximum we can get,” Bonakele noted.

The commission expected a response from the oil companies in a couple of months.

Engineering News Online was unable to secure immediate comment from either the companies, or from Sapia.