Steel producer ArcelorMittal South Africa may face its fifth separate competition case in less than a decade, and its second excessive-pricing matter, after the South African government lodged a complaint with the Competition Commission earlier in the year on behalf of disgruntled tin-plate users.

The complaint was submitted following revelations that tin-plate prices had risen by more than 70% as from April 1, 2009, precipitating a major outcry among users, labour and government.

The DTI's industrial development division deputy DG Nimrod Zalk told Engineering News Online that the department decided to lodge the complaint partly because of its commitment to support a canning sector that was in severe "distress", but also because government was concerned about the possible negative implications of the increase for poor consumers.

Zalk confirmed that the canners' matter had been premised on a complaint of excessive pricing, but that the DTI was not yet aware whether an investigation had been instituted, nor whether it would be referred to the tribunal.

It if were referred, it would open an entirely new excessive-pricing chapter for ArcelorMittal South Africa, after the group closed a long-running matter, involving allegations that its flat-steel products were excessively priced, in September.

The initial case, which was South Africa's first-ever to focus on excessive pricing, turned into a marathon affair, having been referred directly to the Competition Tribunal by gold-miners DRDGold and Harmony in 2004 - this, after the Competition Commission decided not to refer the case, following its own probe of the matter, initiated back in 2002.

The profile of the tin-plate increases increased markedly in April, owing to the fact that they coincided with a series of price cuts on other carbon-steel products and came at a time when food-price inflation was especially "sticky".

ArcelorMittal South Africa attributed the surge to the fact that the adjustment was one of the few it made annually, and could be justified on the basis of a methodology that took account of a material weakening of the rand during 2008, as well as a 25% rise in international tin-plate prices.

But the criticism was amplified by the fact that news of the increase emerged at the height of political campaigning ahead of the April 22 election. It was subsequently taken up by the Department of Trade and Industry (DTI), which expressed concern that the spike might lead to a significant increase in tinned food prices.

The flow-through effect to poor consumers was particularly concerning, with cans comprising as much as 40% of the price of affordable foodstuffs, such as tinned pilchards.

In fact, research undertaken by the South African Fruit and Vegetable Canners' Association (SAFVCA) showed that the price of a can increased by between 45% and 55%, following the price increase.

SAFVCA GM Jill Atwood-Palm stressed on Monday that, while it fully supported the lodging of the complaint by DTI, it had been but one party to a complaint that had received the broad-based backing of tin-plate consumers unhappy with the "excessive increases".

She told Engineering News Online that this unhappiness extended well beyond the price increase itself and to the steel company's pricing methodology itself.

Should the case be referred to the Competition Tribunal for hearings, ArcelorMittal South Africa, which has been described as a "serial offender" on the competition-law front, would find itself defending matters on several fronts.

OTHER MATTERS

There were currently three others "live" matters including:
- The so-called long-products collusion case, which emerged as a result of Scaw Metals' application for corporate leniency last year.
- The ‘Barnes Fencing' matter, where there were claims of price discrimination involving wire rod.
- And a ‘scrap metal' case, where price fixing and joint purchasing arrangements in the ferrous and nonferrous scrap metal supply chain have been alleged, but have not yet been referred to the tribunal.

ArcelorMittal South Africa CEO Nonkululeko Nyembezi-Heita said on Monday that, while she had not heard officially whether the tin-plate case would be taken any further, the company was preparing itself for that possibility.

She stressed, though, that the group had made significant strides in becoming more compliant generally, while changes had also been made to reduce the prospect of future tin-plate price spikes.

Price reductions of between 30% and 26% had been introduced for the period September 30, 2009, to March 31, 2010, following a mid-term review, initiated after Trade and Industry Minister Dr Rob Davies called for price "smoothing".

The reduction reportedly reflected the strong performance of the rand over the past six months, and the fact that international tin-plate prices had remained largely steady during the period.

Nyembezi-Heita stressed that its price-setting methodology was based on a formula, that could be audited and that she was confident that the methodology had been applied "rigorously and very strictly".

"People loved the formula when it produced a price decrease of 30%, but hated it when it went 70% the other way," she asserted.

Atwood-Palm told Engineering News Online that, despite the price reductions, its members remained unhappy with domestic tin-plate prices, which, she claimed, were relatively uncompetitive when benchmarked against prices received by their global competitors.

"A company of our size will always be of interest to regulators," Nyembezi-Heita acknowledged, stressing that some of the matters arose out of a previous era, when competition-law compliance had not been prioritised.

Nevertheless, the company would have to make assessments on a case-by-case basis as to whether or not to defend or settle, even when a matter is regarded as a "legacy" complaint.

"In an ideal world, we would settle legacy cases . . . this would allow us to draw a line under the issue and continue with business. However, there are many, many factors that have to be taken into consideration . . . when making such an assessment," she said.