27 October 2011

The Competition Tribunal confirms consent orders

The Competition Tribunal confirms consent orders between the Competition Commission and members of the Grain Silo industry.

On 17 March 2009, the Competition Commission (Commission) initiated an investigation against members of the Grain Silo Industry (GSI), an industry association for members of the grain storage industry, for alleged contraventions of section 4(1)(b)(i) of the Competition Act. During its investigations the Commission found that the daily storage tariff for the storage of grain was agreed to by all members and shareholders of the GSI which amounted to price fixing.

The essence of the complaint was that each member submitted to GSI individual proposals regarding the appropriate storage rate. The Commission found that the storage rates were collated, evaluated and determined by a committee within GSI, which committee was made up of members from competing silo companies. Given that the GSI members are all competitors in the provision of the grain storage services, the joint determination of the daily storage rate allegedly amounted to prohibited price fixing between firms in a horizontal relationship.

The Competition Tribunal (Tribunal) confirmed the settlement agreements in this matter between the Commission and three of the GSI members, being Morreesburgse Koringboere, Overberg Agri Bedrywe and Sentraal-Suid Co-operative. In terms of the settlement agreements, the three GSI members commit to cooperate with the Commission in prosecuting the remaining cases, to develop and implement competition compliance programmes and to pay cumulative administrative penalties totaling just under R500,000. The penalty was calculated as a percentage (4%) of the total wheat daily storage tariff silo turnover for the 2009 financial year - an indication of the application of the principle laid down by the Competition Appeal Court (CAC) in the Southern Pipeline Contractors and Conrite Walls case, where the CAC indicated that the turnover to be used when calculating the penalties is the turnover derived from sales affected by the cartel conduct, referred to as "affected turnover".

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