Construction firms settle collusive tendering cases with R1.5 billion in penalties Competition Commission: Media release 24 June 2013 Construction firms settle collusive tendering cases with R1.5 billion in penalties The Competition Commission (“Commission”) has reached settlement with 15 construction firms for collusive tendering, in contravention of section 4(1) (b) of the Competition Act. The firms have agreed to penalties collectively totalling R1.46bn. The settlements were reached in terms of the Construction Fast Track Settlement Process, launched in February 2011. The fast-track process incentivised firms to make full and truthful disclosure of bid rigging in return for penalties lower than what the Commission would seek if it prosecuted these cases. Twenty one firms responded to the Commission’s offer of a fast-track settlement. While over 300 instances of bid rigging were revealed through this initiative, the settlements were reached only with respect to projects that were concluded after September 2006, before which transgressions are beyond the prosecutorial reach of the Competition Act. The breakdown of penalties per firm is as follows: Firm Settlement amount (ZAR) Aveng 306 576 143 Basil Read 94 936 248 Esorfranki 155 850 G Liviero 2 011 078 Giuricich 3 552 568 Haw & Inglis 45 314 041 Hochtief 1 315 719 Murray & Roberts 309 046 455 Norvo 714 897 Raubex 58 826 626 Rumdel 17 127 465 Stefanutti 306 892 664 Tubular 2 634 667 Vlaming 3 421 662 WBHO 311 288 311 Total 1 463 814 392 The responses to the Construction Fast Track Settlement offer revealed various ways in which firms historically determined, maintained and monitored collusive agreements. These included meetings to divide markets and agree on margins. Different combinations of firms coordinated tenders over different projects. Firms colluded to create the illusion of competition by submitting sham tenders (“cover pricing”) to enable a fellow conspirator to win a tender. In other instances, firms agreed that whoever won a tender would pay the losing bidders a “loser’s fee” to cover their costs of bidding. Sub-contracting was also used to compensate losing bidders. 1 Three firms did not accept the Commission’s settlement offer in terms of the fast track process. These are: Group 5, Construction ID and Power Construction. Construction firms that have not used the opportunity disclose or settle contraventions will be investigated and prosecuted. With the evidence gathered during this process, the Commission will investigate and prosecute firms that have not disclosed any projects but are implicated by others or those that have elected to settle only some of the projects that they are implicated in. Competition Commissioner, Shan Ramburuth, was pleased with participation in the fast track settlement. He emphasised that “in revealing the extent of collusion in the construction industry, the Commission’s fast track settlement broke up existing cartels and created awareness of collusive practices in the industry. Embedding a competitive culture will be critical to bringing down the costs of future infrastructure investments and will incentivise firms toward innovation and efficiency in future projects”. For more Information: Trudi Makhaya, Deputy Commissioner 012 394 3326/ 073 289 3570 / trudim@compcom.co.za Keitumetse Letebele, HOD: Communication 012 394 3183/ 082 783 3397/ keitumetsel@compcom.co.za Themba Mathebula, External Communications Coordinator 012 394 3325/ 084 896 0860/ thembama@compcom.co.za 2 Date: 24/06/2013 12:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.