Long and flat steel producers ArcelorMittal South Africa, Cape Gate and Cape Town Iron Steel Works could face penalties amounting to 10% of their annual turnover in South Africa and their exports from the country in the preceding financial year, the Competition Commission said on Tuesday.
Following an investigation into potential collusion in the steel industry, which was initiated in April last year, the Commission announced on Tuesday that it had recommended that the Competition Tribunal impose administrative penalties against the three steel producers.
ArcelorMittal South Africa said in a statement that it would cooperate with, and present its case to, the regulatory authorities in due course.
The Department of Trade and Industry had initially raised concerns over steel prices.
Research conducted by the Commission had then suggested that the steel mills had been charging local customers at around import parity price levels since 2002, despite the fact that South Africa was a net exporter of steel, the Commission highlighted in a statement.
It added that a fourth steel producer, Scaw South Africa, had, subsequent to a search-and-seizure operation, applied for corporate leniency for price fixing and market allocation in relation to rebar and wire rod.
“Scaw admitted its participation in the cartel and confirmed that there has been a long-standing culture of cooperation amongst the steel mills regarding the prices to be charged, and discounts to be offered, for their steel products. The cooperation extended to arrangements for [the] market division,” the Commission stated.
Its investigation had confirmed the allegations made by Scaw, while further evidence of collusion was uncovered, the Commission said, adding that it found that the four producers had exchanged information by using their membership in The South African Iron and Steel Institute to facilitate cartel activity, which involved price fixing, the fixing of trading conditions and market division.
The Commission had, therefore, referred a complaint to the Competition Tribunal against the alleged parties.
Meanwhile, the Commission has also started with an investigation into potential collusive practices in one of its other priority sectors, the construction sector.
It reported that it had initiated an industrywide investigation against some of South Africa’s largest construction companies, including Grinaker-LTA, Stefanutti Stocks, WBHO, Murray & Roberts and Aveng.
Investigations against Concor, Liviero, Ciuricich, Hochtief, Dura, Nishimatsu, Esorfranki, VNA Pilings, Rodio, Diabor, Gauteng Piling, Fairbrother, Geomechanics and other firms, as well as joint-venture (JV) partnerships in the industry, would also be undertaken.
The Commission noted that it has, since March, received a number of applications for corporate leniency from construction companies for collusive practices with respect to certain construction projects.
A preliminary investigation undertaken by the Commission on the identified projects had indicated that there could be widespread collusion in the construction industry, it stated.
The applications for leniency had, in particular, highlighted that the “prevalent” collusive practices could include: price fixing in the form of fixing margins for tenders and compensating the losing bidder, the allocation of customers, projects or tenders through the use of scorecards, and collusive tendering by submitting uncompetitive bids.
Preliminary investigations had also revealed that construction firms often joined JVs when bidding for certain projects. These JVs could be used as a platform to engage in collusive practices, said the Commission.
“Some of the joint ventures have permanent status and continue to be used by competitors in the industry as a platform for sharing sensitive competitive information,” it added.
Such collusive practices tended to distort competition and led to increased prices, which placed a burden on the State and the economy, given the boom in activity in South Africa’s construction and infrastructure sectors in recent years.
“International experience has shown that collusive practices of this nature are also prevalent in the construction industry in other countries,” said Competition Commission deputy commissioner Tembinkosi Bonakele.