The Competition Tribunal on Monday confirmed last week’s order of consent agreement between the Competition Commission and State-owned Pelchem, in which Pelchem, which provides surface fluorination for various uses, agreed to remove exclusivity clauses in its agreements with clients.

This follows a complaint lodged in December 2013 by engineering firms Colvic Petroleum Products and Colvic Marketing & Engineering.

The commission found that Pelchem was the sole supplier of fluorination services in South Africa and that the fluorochemical provider, a subsidiary of the South African Nuclear Energy Corporation (Necsa), had concluded certain evergreen contracts with firms for the fluorination of certain plastic products.

These contracts stipulated that Pelchem could only fluorinate a certain type of plastic product for that contracting party on an exclusive basis.

The commission found that such exclusivity resulted in anticompetitive behaviour, as Pelchem is the sole provider of such fluorination services.

The recent consent agreement ensures that surface fluorination services in South Africa are “opened up” and no longer restricted through exclusivity agreements by Pelchem.

In terms of this order, Pelchem, the monopoly supplier, has undertaken to remove exclusivity restrictions and evergreen duration from its current and future surface fluorination contracts in respect of high-density polyethylene (HDPE) pipes, fuel tanks, HDPE and polypropylene buckets, and electric cables.

Subsequently, any customer can now approach Pelchem to procure surface fluorination services without any exclusivity restrictions.

The tribunals order marks the end of the anticompetitive exclusive and evergreen agreements that Pelchem had entered into with various manufacturers.

Removing the exclusivity clauses will significantly open up access to surface fluorination, which has been a significant barrier for certain manufacturers in the affected markets.