Competition Commission v Engen Petroleum Ltd (06/CR/Mar 10) [2012] ZACT 14; [2012] 1 CPLR 69 (CT) (22 February 2012)

COMPETITION TRIBUNAL

REPUBLIC

OF SOUTH AFRICA

Case No:06/CR/Mar10

In the matter between:

The Competition Commission …..........................................................................Applicant

and

Engen Petroleum Ltd …....................................................................................Respondent

Panel: A Wessels (Presiding Member), M Mokuena (Tribunal Member) and M Holden (Tribunal Member)

Heard on : 22 February 2012

Decided on : 22 February 2012

Order

The Tribunal hereby confirms the order as agreed to and proposed by the Competition Commission and the respondent, annexed hereto marked "A".

Presiding Member

A Wessels

Concurring: M Mokuena and M Holden

IN THE COMPETITION! TRIBUNAL OF

SOUTH AFRICA

HELD IN PRETORIA

CT Case No. o6/CR/Mar 10

CG Case No. 2009Jan4223

In the matter between

CMPETITION COMMISSION …................................................................................................................................Applicant

ENGEN PETROLEUM LIMITED ….......................................................................................................................Respondent.

in re

CHEVRON SA (PTY) LTD ….........................................................................................................First Respondent

ENGEN PETROLEUM LIMITED …..........................................................................................................Second Respondent

SHELL SA (PTY) LTD ….............................................................................................................Third Respondent

TOTAL SA (PTY)

LTD

…..........................................................................................................................Fourth Respondent

MASANA PETROLEUM SOLUTIONS (PTY) LTD …...................................................................................Fifth Respondent

SOUTH

AFRICAN BITUMEN ASSOCIATION ….........................................................................................Sixth Respondent

SASOL LIMITED Seventh Respondent

TOSAS (PTY) LTD Eighth Respondent

SETTLEMENT AGREEMENT

BETWEEN THE

COMPETITION COMMISSION ENGENPETROLEUM

LIMITED IN RESPECT OF AN ALLEGED CONTRAVENTION OF SECTION 4{i).{b)(i)f OF THE COMPETION ACT, 1998 (ACT NO.89 OF 1998), AS AMENDED

The Commission and Engen Petroleum Limited (“Engen”) hereby, agree that application be made to the competition Tribunal for the confirmation' of this Settlement Agreement as an order of the. Competition Tribunal in terms' of section 27(1 )(d) read wife section 58 (1) (a) (iii) of the Competition Act, 1998 {Act No. 89 of 1998}, as amended, on the terms set out below. 1.

1. Definitions

For the purposes of this Settlement agreement the following definitions shall apply:

1.1. "Act' means the Competition Act, 1998- (Act No..89 of 1998} as amended

1.2. "Bitumen* means a residual fraction' of crude- oil,- a mixture of organic components that- are highly viscous, black and sticky;

1.3. "Chevron" means Chevron SA (Pty) Ltd a company duly Incorporated with limited liability in' terms of the company laws of the the Republic of, South Africa,, with its principal place of business at 19 DF Malan Street Cape Town;

1.4. "Commission" means- the,Competition Commission of South Africa, a statutory body established in" terms of section 19 of the Act, with its principal place of-business at f81 Floor, MuIayo Building (Block C, the DTI Campus, 77 Meintjie's Street, Sunnysicfe, Pretoria, Gauteng;

1.5. "Commissioner'' means'- the -Commissioner, of the Competition Commission, appointed in terms of section 22 of the Act;

1.6. “Complaint” means the' complaint initiated- by the Commissioner of the Competition Commission in terms of section 49B of the Act under-ease number 2009Jan4223;

1.7. "Settlement Agreement?' means this-agreement duty signed and concluded between the Commission and Engen;-

1.8. "CLP" means the Corporate Leniency Policy prepared and issued by- the Commission' as a guideline, to clarify the Commission's policy approach on matters failing within, its Jurisdiction in terms.of the Act;

1.9. "Engen “ means Engen Petroleum Limited, a company duiy incorporated and- registered in terms of the company laws of the Republic of South Africa with its principal p!ac^ .'of business at Btsjeh'tSourt Thfbault Square, corner of Riebeeck and Long Streets, Cape Town.

1.10 "Masana” means Masana Petroleum: Solutions (Pty} Limited, a 'company duly incorporated and registered7 in terms of the company ia.ws of the Republic of South Africa with its principal place of business at 10 Junction. Avenue', Parktown, Johannesburg.

1.11. "Parties" means the' Commission and Engen;

1.12. "SABITA" means Southern African Bitumen Association (“SABITA") a: voluntary

nonprofit association with-its. principal place of business at 5 Lonsdale, Lonsdale Wifey, P'iheiands; Cape Town;

1.13. "Sasol means Saso! Limited, {-Saso'i-}, a- company duly incorporated and

registered in terms of the company iaws of the Republic of South Africa, with its principal place of business at i: Sturdee Avenue, Rbsebanfe, Johannesburg;

1.14. "Shell" means. Shelf SA (Pty) Ltd; (-Shell).a-.company duly incorporated and

registered. trf'terrrfs of the company laWs- of the- Republic of 'South Africa,- with Its principal place of business at Shell House; 9 Riebeeck Street cape Town;

1.15. "Tosas"' means1 Tosass (Pty) Ltd (Tosas"), a company duly incorporated and

registered in terms of the company la^.s.of the Republic of South Africa, with its. pri'ncipaJ place of. business at 12'Commercial. Road, Wadevilte, Johannesburg, The eighth'respondent is a wholly owned subsidiary of the seventh respondent. Prior 'to:'Aprif.2'00S-, the1 eighth respondent was a jointventure between Sasol and Total in terms of Which Sasdf owned 70^ of ihe issued share capital and Total owned 30%';

1.16-. 'Totar means Total SA (Pty) Ltd .("Total!,, a company duly incorporated and registered In terms of the company iaws of'the Republic of South Africa, with it& principal place: of business at Total House,- 3 Blerma'nn Avenue; Ro^ebank,-Johannesburg;

1.17 "Tribunat means tfte Competition Tribunal of South. Africa, a statutory body establishes" -in terms of section' 26 'of the Act, .frith its' principal place of business at; 3* Floor, Mulayo building (Block C), the DTI Campus,'77 fences Street Sunnyside, Pretoria, Gauteh'g, 2. The Complaint and Complaint Investigation 2.1 On 10 September 2008,. S8$pf together yvitfx its-'subsidiaries, including 'Tpsas,applied, for and' subsequently obtained conditional immunity in terms ofparagraph '12' of the applicant's; CtP, in. respect: of'.their participation- in the'development of, and agreement to adopt, .a. pricing'mechanism Iri respectoT thesale of base b'ibmen and bituminous product's. 2.2 in its application for leniency Saso/'aiieged'th'at-it, together with Chevron, Ehgem Shelf, Total, Masana and Tosas being, parties in a horizontal relationship., had contravened;, section 4(ij{b)(i) of the Act by engaging in price fixing by agreeing to. a- mechanism to calculate the WL8.P (Wholesale List Selling'Priced and fcxthe development and'implementation of the BPAF (Bitumen Prs£.e Adjustment Factor) in relation to the sale of base bitumen-and bituminous products. 2.3. On 12 January 2009, and pursuant'to $&sot's lepiendV application, the applicant Initiated a .complaint in terms of section 49(B) (1 > of the Act- against the' respondents as described in the complaint referral The applicant

conducted an investigation- into the relevant facts disclosed by Sasol and concluded that Chevron, Eng'en, $tieti; Total, MasmaF. S'asoi and Tosas had indeed engaged in restrictive horizontal practices^.in contraventibn'Of section 4(1 ){b){i). of the Act. 2.4. The Commission's investigation revealed that: 2.4.1. in and during, the period commencing from September 2000 to December 2QQ9, and possibly thereafter, Chevon, Engem Shell, Total, Masana, Sssol and Tosas, being "parties in a'horizontal relationship, acting through their representatives,, entered into various agreements; and.-engaged" in conduct'that

involved'concerted pra'btices'andf'orto'bk decisions that were intended to directly and, indirectly fix the purchase or selling price of bitumen' and bituminous'' products in the Republic:- in contravention" of section 4(:1j(b){i) of'the Act 2.4.2. Chevron, Engen, Shell, Total, Sksol and Tosas.-are' producers--and / or suppliers of bitumen, arid compete With one another in the production.and / or sate of bitumen and bituminous products in- the Republic: Chevron,' Ehgeh. Shelly Total, aqd Sasol are also members.of SA&}TAf a n.on-profit organisation thai represents infer alia producers' of and applicators of bituminous products-. 2.4.3. The: respondents, operating through SAB/FA as weli as through other -forms of co'mmunicattohs-y. including bilateral communications

between them, ;agreed,a formula for' determining me.- pricing of base bitume'rt and bituminous products. 2.4.4. Historically, prior to the'Act coming into force, the petroleum and energy-companies, calculated the prices for bitumen with reference* to a'n industry­wide retail' price' list for bitumen and bituminous, products. "This was cafcuEatecj-codecfiv.eiy by all petrofeum companies'and was referred to. as the. Wholesale-List Seeing Price fVVLSP"):. From 1086 until 2000 foe WLSP was government sanctioned and exempted from the price-fixing prohibitions that applied at the time ("the WLSP exemption"). 2.4.5. The WLSP for bitumen was made- up of the In Bond Landed Costs fiBLC),- which essentially was an import-parity based formula where various transport related costs, were added, to a ifre.e On. Board ("FOB") heavy'fuel oil price' attypica! international refining centres'. This base price was replaced finally by the Durban Bunker price/.-Added'to the IBLC to arrive at the- WLSP were the1 SABITA'fevyi the margin and the- Road Equalisation Factor f REF"), which was subsequently replaced by the Crude Oil Pipeline tariff. 2.4.6 chevron, Engen,, Shell, total, Masana, Sasol and Tosas and other role players, in the .industry, in contravention of section 4-pfthe Act,, discussed the'establishment of'a mechanism to set the WISP of bitumen in relation to the Bitumen Pricing. Index (BPf)f later called the. Bitumen prib'fe AdjustementTactor' (BPAF), The- respondents adopted the BPfr'BPAF'as a basis for adjusting their fist prices from time to time, 3. The Complaint Referral 3.1. The Commission referred the above complaint to the Tribune! on 4 Marcfr201Q. 3.2. Engen has engaged with the. Commission in settlement discussions since May 2010.

4. Statement of Conduct Engen admits that-it has contravened section 4(.1)£b)(i) of the Act, in that-the bitumen department in lis Engen Sales-and Marketing

division (ESM) agreed with its.-competitors to -a"; mecha'nis'm to calculate its:

WLSP (.Wholesale List Selling .Price), and to, the development &M implementation of the BPI/BPAF in relation to the- sale, of penetration grade bitumen in South Africa.

5. Agreement concerning future conduct5.1 Engen agrees to: 5.1.1. fully cooperate with the Commission in relation to the prosecution of the complaint referral. Without; limiting the generality of. the foregoing, Engen specifically agree:es to: (a) testify in the. complaint referral (if any} in respect of alleged contraventions covered by this Settlement Agreement; and (b) to the extent that it' is in" existence, provide- evidence; Written or otherwise,, which is- in its' possession or under irs control, concerning' the alleged contravention's contained In this Settlement Agreement; 5.1.2. desist from the conduct described above;' 5.1.3. further develop, implement and monitor its competition law compliance-programme incorporating; corporate governance designed to ensure th.St its employees^ management, directors andagehts .do not engage in future' contraventions of the Act in particular,, such compliance programme will: 5.1.3.1. include a. competition policy to be drafted and implemented 5.1.3.2. provide specific- training, on competition law aspects particularly relevant to-'Eng&n;- 5.1.3.3 ensure: that such training will be made.available, to all new employees joining Engen-. Furthermore, Eftgeh Wiil update such training annually; 5.1.4 submit a copy of such compliance programme to the' Commission within 60 days of the date of confirmation' of the Settlement'Agreement- as

:an order by the Competition Tribunal;; 5.1.;5. To.circulate a. statement summarising the-contents of this-Settlement-Agreement to all management and operational staff employed, at- Engen within 60 days from the date of confirmation of this Settlement Agreement' by the Tribunal'; 6. Administrative Penalty 6.1. Having regard to the provisions of sections §8<:1}|a)(iii} as read wftfr "sections 50(1 fta), 59(2) and- 59(3) of the Act, Erig&n accepts that it is liable' to' pay an administrative penalty. The parties have agreed that Engen will pay; an-- administrative penalty in the amount b'f R28 800 000* (twenty"eight million eight hundred thousand rand); 6.2. This- amount cJq^s not exceed 10% of En$&h'$. total artriuat income- in the Republic- and its:exports'from'-the Republic for its 20Q9 financial year;. 6.3. Engen will pay- the amount set out in paragraph 6-1 above' to the Commission within iSO business. dav.s-from the date of confirmation of-this Settlement" agreement by the Tribunal, 6.4. The penalty must be' paid Into the Commission's' bank' account" which is asfollows'-: NAME:'THE

COMPETITION COMMISSION FEE

ACCOUNT BANK: ABSA BANK, PRETORIA ACCOUNT NUMBER; 4650778576 BRANCH CODE': 323345 6.5. The penalty will be pa[d over' by the Commission, to the National Revenue Fundin accordance with the provisions of section ;59(4) of the Act; 7. Full and Final Settlement This agreement; upon confirmation as an order by the Tribunal, is entered into in full and final settlement and concludes all proceedings between the Commission and' Engen relating to any "alleged contravention by. the respondents of the Act that is:the subject of. the Commission's investigation referred to- the Tribunal under CT Case Ho. 06/CR/Mar10 Dated and signed at CAPE TOWN on the 10th day of February 2012 For Engen Petroleum Limited Chief Executive Officer Dated and signed at Pretoria on the 10th day of February 2012 For the Commission Competition Commissioner

1.17 "Tribunat means tfte Competition Tribunal of South. Africa, a statutory body

establishes" -in terms of section' 26 'of the Act, .frith its' principal place of business at; 3* Floor, Mulayo building (Block C), the DTI Campus,'77 fences Street Sunnyside, Pretoria, Gauteh'g,

2. The Complaint and Complaint Investigation

2.1 On 10 September 2008,. S8$pf together yvitfx its-'subsidiaries, including 'Tpsas,applied, for and' subsequently obtained conditional immunity in terms ofparagraph '12' of the applicant's; CtP, in. respect: of'.their participation- in the'development of, and agreement to adopt, .a. pricing'mechanism Iri respectoT thesale of base b'ibmen and bituminous product's.

2.2 in its application for leniency Saso/'aiieged'th'at-it, together with Chevron, Ehgem

Shelf, Total, Masana and Tosas being, parties in a horizontal relationship., had contravened;, section 4(ij{b)(i) of the Act by engaging in price fixing by agreeing to. a- mechanism to calculate the WL8.P (Wholesale List Selling'Priced and fcxthe development and'implementation of the BPAF (Bitumen Prs£.e Adjustment Factor) in relation to the sale of base bitumen-and bituminous products.

2.3. On 12 January 2009, and pursuant'to $&sot's lepiendV application, the applicant Initiated a .complaint in terms of section 49(B) (1 > of the Act- against the' respondents as described in the complaint referral The applicant conducted an investigation- into the relevant facts disclosed by Sasol and concluded that Chevron, Eng'en, $tieti; Total, MasmaF. S'asoi and Tosas had indeed engaged in restrictive horizontal practices^.in contraventibn'Of section 4(1 ){b){i). of the Act.

2.4. The Commission's investigation revealed that:

2.4.1. in and during, the period commencing from September 2000 to December 2QQ9, and possibly thereafter, Chevon, Engem Shell, Total, Masana, Sssol and Tosas, being "parties in a'horizontal relationship, acting through their representatives,, entered into various agreements; and.-engaged" in conduct'that

involved'concerted pra'btices'andf'orto'bk decisions that were intended to directly and, indirectly fix the purchase or selling price of bitumen' and bituminous'' products in the Republic:- in contravention" of section 4(:1j(b){i) of'the Act

2.4.2. Chevron, Engen, Shell, Total, Sksol and Tosas.-are' producers--and / or suppliers of bitumen, arid compete With one another in the production.and / or sate of bitumen and bituminous products in- the Republic: Chevron,' Ehgeh. Shelly Total, aqd Sasol are also members.of SA&}TAf a n.on-profit organisation thai represents infer alia producers' of and applicators of bituminous products-.

2.4.3. The: respondents, operating through SAB/FA as weli as through other -forms of co'mmunicattohs-y. including bilateral communications

between them, ;agreed,a formula for' determining me.- pricing of base bitume'rt and bituminous products.

2.4.4. Historically, prior to the'Act coming into force, the petroleum and energy-companies, calculated the prices for bitumen with reference* to a'n industry­wide retail' price' list for bitumen and bituminous, products. "This was cafcuEatecj-codecfiv.eiy by all petrofeum companies'and was referred to. as the. Wholesale-List Seeing Price fVVLSP"):. From 1086 until 2000 foe WLSP was government sanctioned and exempted from the price-fixing prohibitions that applied at the time ("the WLSP exemption").

2.4.5. The WLSP for bitumen was made- up of the In Bond Landed Costs fiBLC),- which essentially was an import-parity based formula where various transport related costs, were added, to a ifre.e On. Board ("FOB") heavy'fuel oil price' attypica! international refining centres'. This base price was replaced finally by the Durban Bunker price/.-Added'to the IBLC to arrive at the- WLSP were the1 SABITA'fevyi the margin and the- Road Equalisation Factor f REF"), which was subsequently replaced by the Crude Oil Pipeline tariff.

2.4.6 chevron, Engen,, Shell, total, Masana, Sasol and Tosas and other role players, in the .industry, in contravention of section 4-pfthe Act,, discussed the'establishment of'a mechanism to set the WISP of bitumen in relation to the Bitumen Pricing. Index (BPf)f later called the. Bitumen prib'fe AdjustementTactor' (BPAF), The- respondents adopted the BPfr'BPAF'as a basis for adjusting their fist prices from time to time,

3. The Complaint Referral

3.1. The Commission referred the above complaint to the Tribune! on 4 Marcfr201Q.

3.2. Engen has engaged with the. Commission in settlement discussions since May 2010.

4. Statement of Conduct

Engen admits that-it has contravened section 4(.1)£b)(i) of the Act, in that-the bitumen department in lis Engen Sales-and Marketing

division (ESM) agreed with its.-competitors to -a"; mecha'nis'm to calculate its:

WLSP (.Wholesale List Selling .Price), and to, the development &M implementation of the BPI/BPAF in relation to the- sale, of penetration grade bitumen in South Africa.

5. Agreement concerning future conduct5.1 Engen agrees to:

5.1.1. fully cooperate with the Commission in relation to the prosecution of the complaint referral. Without; limiting the generality of. the foregoing, Engen specifically agree:es to:

(a) testify in the. complaint referral (if any} in respect of alleged contraventions covered by this Settlement Agreement; and

(b) to the extent that it' is in" existence, provide- evidence; Written or otherwise,, which is- in its' possession or under irs control, concerning' the alleged contravention's contained In this Settlement Agreement;

5.1.2. desist from the conduct described above;'

5.1.3. further develop, implement and monitor its competition law compliance-programme incorporating; corporate governance designed to ensure th.St its employees^ management, directors andagehts .do not engage in future' contraventions of the Act in particular,, such compliance programme will:

5.1.3.1. include a. competition policy to be drafted and implemented

5.1.3.2. provide specific- training, on competition law aspects particularly relevant to-'Eng&n;-

5.1.3.3 ensure: that such training will be made.available, to all new employees joining Engen-. Furthermore, Eftgeh Wiil update such training annually;

5.1.4 submit a copy of such compliance programme to the' Commission within 60 days of the date of confirmation' of the Settlement'Agreement- as :an order by the Competition Tribunal;;

5.1.;5. To.circulate a. statement summarising the-contents of this-Settlement-Agreement to all management and operational staff employed, at- Engen within 60 days from the date of confirmation of this Settlement Agreement' by the Tribunal';

6. Administrative Penalty

6.1. Having regard to the provisions of sections §8<:1}|a)(iii} as read wftfr "sections

50(1 fta), 59(2) and- 59(3) of the Act, Erig&n accepts that it is liable' to' pay an administrative penalty.

The parties have agreed that Engen will pay; an-- administrative penalty in the amount b'f R28 800 000* (twenty"eight million eight hundred thousand rand);

6.2. This- amount cJq^s not exceed 10% of En$&h'$. total artriuat income- in the

Republic- and its:exports'from'-the Republic for its 20Q9 financial year;.

6.3. Engen will pay- the amount set out in paragraph 6-1 above' to the Commission

within iSO business. dav.s-from the date of confirmation of-this Settlement" agreement by the Tribunal,

6.4. The penalty must be' paid Into the Commission's' bank' account" which is asfollows'-:

NAME:'THE

COMPETITION COMMISSION FEE

ACCOUNT

BANK: ABSA BANK, PRETORIA

ACCOUNT NUMBER; 4650778576

BRANCH CODE': 323345

6.5. The penalty will be pa[d over' by the Commission, to the National Revenue Fundin accordance with the provisions of section ;59(4) of the Act;

7. Full and Final Settlement

This agreement; upon confirmation as an order by the Tribunal, is entered into in full and final settlement and concludes all proceedings between the Commission and' Engen relating to any "alleged contravention by. the respondents of the Act that is:the subject of. the Commission's investigation referred to- the Tribunal under CT Case Ho. 06/CR/Mar10

Dated and signed at CAPE TOWN on the 10th day of February 2012

For Engen Petroleum Limited

Chief Executive Officer

Dated and signed at Pretoria on the 10th day of February 2012

For the Commission

Competition Commissioner