Pretoria – ArcelorMittal South Africa Limited (AMSA) has agreed to pay an administrative penalty of R1.5 billion for its involvement in the long steel and scrap metal cartels.
The Competition Commission reached the settlement agreement with AMSA.
The amount, which will be paid in five annual instalments of no less than R300 million, will cover all pending cases against AMSA, including those that are still under investigation.
“AMSA has agreed to remedies relating to complaints against its pricing conduct without admitting that its pricing conduct constituted a contravention of the Competition Act.
“In this regard, AMSA has undertaken that for a period of five years it will limit its EBIT (earnings before interest and tax) margin to a cap of 10% for flat steel products sold in South Africa,” the Commission said.
In addition, AMSA has committed to a R4.64 billion capital expenditure over five years.
The commission’s investigations and finding include an investigation against long and flat steel producers in South Africa, involving AMSA.
“This investigation was initiated following concerns about high and increasing prices of steel products observed by the Commission, despite South Africa being a net exporter of steel.
“As part of the investigation, on 19 June 2008, the Commission conducted a dawn raid at the premises of Cape Town Iron and Steel Works (Pty) Ltd (CISCO), Highveld Steel and Vanadium Corporation Limited (Highveld), and the South African Iron and Steel Institute,” the Commission said.
Subsequently, Scaw South Africa (Pty) Ltd (Scaw), a subsidiary of Anglo American Plc, applied for and was granted leniency for its involvement in collusive practices.
The Commission’s investigation found that AMSA, CISCO, Scaw and Cape Gate (Pty) Ltd (Cape Gate), being competitors in the manufacturing of long steel products, engaged in collusion by fixing prices and discounts, allocating customers and sharing commercially sensitive information through the South African Iron and Steel Institute (SAISI) and the South African Reinforced Concrete Engineers’ Association.
The scrap metal cartel
In December 2009, the Commission initiated an investigation against the consumers of scrap, namely AMSA, Highveld, Cape Gate, CISCO and Columbus Stainless Steel (Pty) Ltd (Columbus Steel) for collusive practices.
The Commission’s investigation found that AMSA, Columbus Steel, Cape Gate and Scaw fixed the purchase price of scrap metal.
“In this regard, the Commission found that these firms collectively negotiated and agreed a standard formula, which was used to determine the purchase price of scrap metal as a buyers’ cartel.
“The Commission found that AMSA and Columbus Steel, Cape Gate and Scaw collaborated and acted in tandem with the upstream cartel of scrap merchants,” the Commission said.
The Commission referred this matter to the Tribunal for adjudication.
The flat steel cartel
In April 2008, the Commission initiated an investigation against flat steel producers Highveld and AMSA.
The Commission found that during the period 1999 and 2009, AMSA and Highveld had an understanding in terms of which Highveld would follow AMSA’s lead on pricing in the flat steel market.
The Commission also found that AMSA and Highveld used the industry association, SAISI, to exchange commercially sensitive information, such as sales volumes.
“This conduct constituted price fixing and market allocation in contravention of the Competition Act. On 30 March 2012, the Commission referred a complaint against AMSA and Highveld to the Tribunal,” the Commission said.
The Barnes Fencing complaints
In December 2003, the Commission received complaints from Barnes Fencing Industries (Pty) Ltd, F&G Quality Tubes (Pty) Ltd and Dunrose Trading (57) (Pty) Ltd against AMSA and various wire producers.
“The complaints alleged that AMSA differentiated between its customers in terms of discounts offered for low carbon wire rod and that this conduct amounted to price discrimination in contravention of the Competition Act.
“The Commission’s investigations found that AMSA engaged in the conduct of price discrimination in contravention of the Competition Act,” the Commission said.
This complaint concerned the period 2000 to 2003. The complaints were referred to the Tribunal for adjudication in January 2007.
In the second complaint received in December 2008, the same complainants alleged that the conduct complained of in the first complaint had continued from 2004 to 2006. The Commission referred the second complaint to the Tribunal in November 2012.
The excessive pricing complaint
In July 2011, the Commission initiated a complaint into AMSA’s pricing policy for its flat steel products based on a complaint by the Department of Trade and Industry.
The investigation pertained to AMSA allegedly charging excessive prices for its flat steel products in contravention of the Competition Act. The Commission has not made a finding in this matter.
“The Commission is delighted to bring an end to these longstanding proceedings. The penalty sends a strong message of deterrence and is an important milestone in the Commission’s enforcement against cartels,” Commissioner Tembinkosi Bonakele said.
Minister welcomes penalty
Minister of Economic Development Ebrahim Patel said the action by the competition authorities is part of a crackdown against abuse of market power and price-fixing that undermines the performance of the economy, imposes unnecessary costs on downstream factories and damages local jobs.
"South Africa's competitiveness and industrial performance require an efficient basic steel supplier industry.
“High levels of concentration, together with collusion, undermines our national goals,” Minister Patel said.
He said South Africa wants to send a message that it is open for business and it will act against conduct that damages competition and jobs. – SAnews.gov.za
