Competition Commission v Kaap Afgri Bedryf Ltd; In re: Competition Commission v Afgri Operations Ltd and Others (43/CR/Jun11) [2011] ZACT 35; [2011] 1 CPLR 105 (CT) (15 June 2011)

COMPETITION TRIBUNAL

REPUBLIC OF SOUTH AFRICA

Case No: 43/CR/Jun11

In the matter between:

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

and

Kaap Afgri Bedryf Limited …...................................................................................Respondent

Panel : N Manoim (Presiding Member), Y Carrim (Tribunal

Member), and A Wessels (Tribunal Member)

Heard on : 15 June 2011

Decided on : 15 June 2011

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

M Manoim

Concurring: Y Carrim and A Wessels

IN THE COMPETITION TRIBUNAL OF SOUTH AFRICA HELD IN PRETORIA CT Case No. CC Case No. 2009Mar4349 In the matter between: THE COMPETITION COMMISSION …...............................................................................Applicant and KAAP AGRI BEDRYF LIMITED ….............................................................................11th respondent In re: COMPETITION COMMISSION ….........................................................................................Applicant and AFGRI OPERATIONS LIMITED …..............................................................................1st Respondent SENWES LIMITED ….....................................................................................................2nd Respondent NWK LIMITED …............................................................................................................3rd Respondent OVK OPERATIONS LIMITED ….................................................................................4th Respondent SUIDWES (PTY) LIMITED …........................................................................................5th Respondent VRYSTAAT KOOPERASIE beperk …..................................................6th Respondent OVERBERG AGRI (PTY) LIMITED …........................................................................7th Respondent DIE HUMANSDORPSE KOOPERASIE BEPERK ….................................................8th Respondent SENTRAAL-SUID KOOPERASIE BEPERK …...........................................................9th Respondent GWK LIMITED …..........................................................................................................10th Respondent KAAP AGRI BEDRYF LIMITED …............................................................................11th Respondent MGK BEDRYFSMAATSKAPPY (PTY) LIMITED …..............................................12th Respondent TUINROETE AGRI BEPERK …..................................................................................13th Respondent MOREESBURGSE KORINGBOERE (EDMS) BEPERK …....................................14th Respondent TWK LANDBOU BEPERK …......................................................................................15th Respondent NTK LIMPOPO AGRIC BEPERK …..........................................................................16th Respondent GRAIN SILO INDUSTRY ….........................................................................................17th Respondent CONSENT AGREEMENT IN TERMS OF SECTION 49D READ WITH SECTION S8(1)(a)(iil) and 58(1)(b) OF THE COMPETITION ACT, 1998 (ACT NO. 89 OF 1998), AS AMENDED, BETWEEN THE COMPETITION COMMISSION ("THE COMMISSION") AND KAAP AGRI BEDRYF LIMITED ("KAAP AGRI"), IN RESPECT OF AN ALLEGED CONTRAVENTION OF SECTION 4(1)(b)(i) OF THE COMPETITION ACT, 1998 ("THE ACT").

IN THE COMPETITION TRIBUNAL OF SOUTH AFRICA

HELD IN PRETORIA

CT Case No.

CC Case No. 2009Mar4349

In the matter between:

THE COMPETITION COMMISSION …...............................................................................Applicant

KAAP AGRI BEDRYF LIMITED ….............................................................................11th respondent

In re:

COMPETITION COMMISSION ….........................................................................................Applicant

AFGRI OPERATIONS LIMITED …..............................................................................1st Respondent

SENWES LIMITED ….....................................................................................................2nd Respondent

NWK LIMITED …............................................................................................................3rd Respondent

OVK OPERATIONS LIMITED ….................................................................................4th Respondent

SUIDWES (PTY) LIMITED …........................................................................................5th Respondent

VRYSTAAT KOOPERASIE beperk …..................................................6th Respondent

OVERBERG AGRI (PTY) LIMITED …........................................................................7th Respondent

DIE HUMANSDORPSE KOOPERASIE BEPERK ….................................................8th Respondent

SENTRAAL-SUID KOOPERASIE BEPERK …...........................................................9th Respondent

GWK LIMITED …..........................................................................................................10th Respondent

KAAP AGRI BEDRYF LIMITED …............................................................................11th Respondent

MGK BEDRYFSMAATSKAPPY (PTY) LIMITED …..............................................12th Respondent

TUINROETE AGRI BEPERK …..................................................................................13th Respondent

MOREESBURGSE KORINGBOERE (EDMS) BEPERK …....................................14th Respondent

TWK LANDBOU BEPERK …......................................................................................15th Respondent

NTK LIMPOPO AGRIC BEPERK …..........................................................................16th Respondent

GRAIN SILO INDUSTRY ….........................................................................................17th Respondent

CONSENT AGREEMENT IN TERMS OF SECTION 49D READ WITH SECTION S8(1)(a)(iil) and 58(1)(b) OF THE COMPETITION ACT, 1998 (ACT NO. 89 OF 1998), AS AMENDED, BETWEEN THE COMPETITION COMMISSION ("THE COMMISSION") AND KAAP AGRI BEDRYF LIMITED ("KAAP AGRI"), IN RESPECT OF AN ALLEGED CONTRAVENTION OF SECTION 4(1)(b)(i) OF THE COMPETITION ACT, 1998 ("THE ACT").

The Commission and Kaap Agri hereby agree that application be made to the Tribunal for the confirmation of this Consent Agreement in terms of section 58 (1 )(a)(iii) as read with section 58(1 Xb) of the Competition Act, 1998 (Act No. 89 of 1998), as amended, on the terms set out beiow: 1. Definitions For the purposes of this Consent Agreement the following definitions shall apply: 1.1. "Act means the Competition Act, 1998 (Act No. 89 of 1998), as amended; 1.2. "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 1st Floor, Mulayo Building (Block C), the dti Campus, 77 Meintjies Street, Sunnyside, Pretoria, Gauteng; 1.3. 'Commissioned means the Commissioner of the Commission, appointed in terms of section 22 of the Act; 1.4. "Complaint' means the complaint under case number 2009Mar4349 initiated by the Commissioner in terms of section 49B of the Act, including a complaint concerned with allegations of price fixing in terms of section 4(1 )(b)(t) of the Act initiated on 17 March 2009 as well as an expanded initiation on 25 May 2010 after the decision was made to include all. the members and shareholders of the Grain Silo Industry; 1.5. "Consent Agreement" means this agreement duly signed and concluded between the Commission and Kaap Agri; 1.6. "Grain Silo Industry" means Grains Silo Industry (Pty) Limited, a private company duly incorporated in accordance with the company laws of the Republic of South Africa, having its registered offices at Lynwood Corporate Park, Alkantrantstraat, Lynwood Manor, Pretoria, Gauteng Province. The GS) represents its members in public forums wherein matters related to the storage and trading of grain and oilseeds are discussed and provides specialist research services that members may request on an ad-hoc basis. The GSl represents its constituent

members in interactions with the Agricultural Products Division of the Johannesburg Stock Exchange (the "APD" previously

"SAFEX"). 1.7. "Kaap Agri" means Kaap Agri Bedryf Limited, a company registered and incorporated in accordance with the laws of the Republic of South-Africa with registration number 1995/000336/06 and with its registered office and main place of business, at 65 Voortrekker Road, Maimesbury,

7300; 1.8. "Parties" means the Commission and Kaap Agri; 1.9. "Respondent" means for purposes of this agreement Kaap Agri; 1.10. "Respondents" means Respondents one (1) to seventeen (17) described above; 1.11. "Safex" means the South African Futures Exchange which was established to provide market participants with a price determination mechanism and a price risk management facility through which they can manage their exposure to adverse price movements in the underlying commodity; 1.12. "Tribunal" means the Competition Tribunal of South Africa, a statutory body established in terms of section 26 of the Act, with its principal place of business at 3rd Floor, Mulayo building (Block C), the dti Campus, 77 Meintjies Street, Sunnyside, Pretoria, Gauteng. 2. The Complaint and Complaint Investigation 2.1. On 17 March 2009 the Commissioner initiated a complaint against Afgri Operations Limited ("Afgri"), Senwes Limited ("Senwes"), Noord-Wes Kooperasie Limited ("NWK"), OVK Operations Limited ("OVK"), Suidwes (Pty) Limited ("Suidwes"), Vrystaatse Kooperasie Limited ("VKB") and the Grain Silo Industry ("GSI") for alleged contravention of section 4(1)(b)(i) of the Act. 2.2. The investigation revealed that, at the request of SAFEX, various standardised daily storage rates for grain were agreed to and assented to not only by the entities against whom me original

complaints initiation was made, but by some or all members and shareholders of GSI and recommended to SAFEX from time to time. In the circumstances, on 25 May 2010 the Commissioner expanded the investigation to refer to all seventeen (17) respondents. 2.3. The Commission conducted its investigation and concluded that:

The Commission and Kaap Agri hereby agree that application be made to the Tribunal for the confirmation of this Consent Agreement in terms of section 58 (1 )(a)(iii) as read with section 58(1 Xb) of the Competition Act, 1998 (Act No. 89 of 1998), as amended, on the terms set out beiow:

1. Definitions

For the purposes of this Consent Agreement the following definitions shall apply:

1.1. "Act means the Competition Act, 1998 (Act No. 89 of 1998), as amended;

1.2. "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 1st Floor, Mulayo Building (Block C), the dti Campus, 77 Meintjies Street, Sunnyside, Pretoria, Gauteng;

1.3. 'Commissioned means the Commissioner of the Commission, appointed in terms of section 22 of the Act;

1.4. "Complaint' means the complaint under case number 2009Mar4349 initiated by the Commissioner in terms of section 49B of the Act, including a complaint concerned with allegations of price fixing in terms of section 4(1 )(b)(t) of the Act initiated on 17 March 2009 as well as an expanded initiation on 25 May 2010 after the decision was made to include all. the members and shareholders of the Grain Silo Industry;

1.5. "Consent Agreement" means this agreement duly signed and concluded between the Commission and Kaap Agri;

1.6. "Grain Silo Industry" means Grains Silo Industry (Pty) Limited, a private company duly incorporated in accordance with the company laws of the Republic of South Africa, having its registered offices at Lynwood Corporate Park, Alkantrantstraat, Lynwood Manor, Pretoria, Gauteng Province. The GS) represents its members in public forums wherein matters related to the storage and trading of grain and oilseeds are discussed and provides specialist research services that members may request on an ad-hoc basis. The GSl represents its constituent

members in interactions with the Agricultural Products Division of the Johannesburg Stock Exchange (the "APD" previously

"SAFEX").

1.7. "Kaap Agri" means Kaap Agri Bedryf Limited, a company registered and incorporated in accordance with the laws of the Republic of South-Africa with registration number 1995/000336/06 and with its registered office and main place of business, at 65 Voortrekker Road, Maimesbury,

7300;

1.8. "Parties" means the Commission and Kaap Agri;

1.9. "Respondent" means for purposes of this agreement Kaap Agri;

1.10. "Respondents" means Respondents one (1) to seventeen (17) described above;

1.11. "Safex" means the South African Futures Exchange which was established to provide market participants with a price determination mechanism and a price risk management facility through which they can manage their exposure to adverse price movements in the underlying commodity;

1.12. "Tribunal" means the Competition Tribunal of South Africa, a statutory body established in terms of section 26 of the Act, with its principal place of business at 3rd Floor, Mulayo building (Block C), the dti Campus, 77 Meintjies Street, Sunnyside, Pretoria, Gauteng.

2. The Complaint and Complaint Investigation

2.1. On 17 March 2009 the Commissioner initiated a complaint against Afgri Operations Limited ("Afgri"), Senwes Limited ("Senwes"), Noord-Wes Kooperasie Limited ("NWK"), OVK Operations Limited ("OVK"), Suidwes (Pty) Limited ("Suidwes"), Vrystaatse Kooperasie Limited ("VKB") and the Grain Silo Industry ("GSI") for alleged contravention of section 4(1)(b)(i) of the Act.

2.2. The investigation revealed that, at the request of SAFEX, various standardised daily storage rates for grain were agreed to and assented to not only by the entities against whom me original

complaints initiation was made, but by some or all members and shareholders of GSI and recommended to SAFEX from time to time. In the circumstances, on 25 May 2010 the Commissioner expanded the investigation to refer to all seventeen (17) respondents.

2.3. The Commission conducted its investigation and concluded that:

2.3.1. the respondents and GSI have contravened section 4(1 ){b)(i) of the Act. The essence of the conduct complained of is that the respondents and GSI have contravened section 4(1)(b)(i) of the Act in that they fixed the prices of the daily storage tariff for the storage of grain. This is done for application throughout the Republic. The first to sixteenth respondents are all former cooperatives who own grain storage silos and provide other agricultural services and are competitors in the market for grain storage. 2.4. The Commission found that: 2.4.1. Notwithstanding the fact that they are competitors, the first to sixteenth respondents are all shareholders or members of the GSI. Although the GSI is a private company, it amounts to an industry association for members of the grain storage industry. Until 2008, SAFEX requested on an annual basis that GSI recommend a standardised grain storage tariff. SAFEX placed the onus for recommending the daily storage rates for grain on the GSf on the basis that GSf had the necessary knowledge and understanding of the costs involved in providing grain storage. In 2008, as is set out below, the GSI declined to recommend the standardised storage tariff to SAFEX any longer on account of the Commission's contentions that it and its members were contravening section 4(1)(b)(i)oftheAct 2.4.2. It was the GSI's technical committee that was responsible for agreeing on the recommended SAFEX daily storage tariff on behalf of the GSI and its members, in response to annual requests from SAFEX to recommend a suitable storage tariff for the various grain commodities traded on SAFEX, the GSI consulted some or all of its shareholders. The shareholders submitted individual proposals as to the appropriate SAFEX grain storage rates to the GSI. These rates were collated and evaluated by the GSI's technical committee, the members of which are from competing silo companies. The technical committee then decided on appropriate rates and these were then submitted as recommended grain daily storage tariffs to SAFEX on behalf of GSI and its shareholders.

2.3.1. the respondents and GSI have contravened section 4(1 ){b)(i) of the Act. The essence of the conduct complained of is that the respondents and GSI have contravened section 4(1)(b)(i) of the Act in that they fixed the prices of the daily storage tariff for the storage of grain. This is done for application throughout the Republic. The first to sixteenth respondents are all former cooperatives who own grain storage silos and provide other agricultural services and are competitors in the market for grain storage.

2.4. The Commission found that:

2.4.1. Notwithstanding the fact that they are competitors, the first to sixteenth respondents are all shareholders or members of the GSI. Although the GSI is a private company, it amounts to an industry association for members of the grain storage industry. Until 2008, SAFEX requested on an annual basis that GSI recommend a standardised grain storage tariff. SAFEX placed the onus for recommending the daily storage rates for grain on the GSf on the basis that GSf had the necessary knowledge and understanding of the costs involved in providing grain storage. In 2008, as is set out below, the GSI declined to recommend the standardised storage tariff to SAFEX any longer on account of the Commission's contentions that it and its members were contravening section 4(1)(b)(i)oftheAct

2.4.2. It was the GSI's technical committee that was responsible for agreeing on the recommended SAFEX daily storage tariff on behalf of the GSI and its members, in response to annual requests from SAFEX to recommend a suitable storage tariff for the various grain commodities traded on SAFEX, the GSI consulted some or all of its shareholders. The shareholders submitted individual proposals as to the appropriate SAFEX grain storage rates to the GSI. These rates were collated and evaluated by the GSI's technical committee, the members of which are from competing silo companies. The technical committee then decided on appropriate rates and these were then submitted as recommended grain daily storage tariffs to SAFEX on behalf of GSI and its shareholders.

2.4.3. The essence of the conduct complained of is that the recommended daily storage tariffs for the various grain commodities proposed by GSI to SAFEX were agreed to and assented to by some or all of the respondents. Given that the first to sixteenth respondents are competitors in the provision of storage services, the joint determination of the SAFEX daily grain storage tariffs amounts to prohibited price fixing in that it quite simply amounts to an agreement between firms in a horizontal relationship for the direct fixing of grain storage prices. 2.4.4. The manner in which the standardised SAFEX daily grain storage tariffs were determined is, in the Commission's view, restrictive of competition. In addition to agreeing to the SAFEX daily grain storage tariffs, the respondents exchanged detailed cost information. In addition, the daily grain storage tariffs which were determined for SAFEX purposes have been used to determine storage fees in respect of sales transactions in the physical market. This, in the Commission's view, amounts to collusion. 2.5. The Commission took a decision to refer to the Tribunal its complaint that is described above. 3. Statement of conduct by Kaap Agri 3.1. Kaap Agri admits that, as a member of the GSI, it participated to a very limited extent in agreeing on the standardised daily wheat storage tariffs which were recommended to SAFEX and that the SAFEX dally grain storage tariffs were used in respect of transactions in the physical market. 3.2. Kaap Agri was bona fide in its actions and did not intend to contravene the Act It agrees that its conduct may, inadvertently, have been in contravention of section 4(1 )(b)(i) of the Act. 4. Administrative Payment

2.4.3. The essence of the conduct complained of is that the recommended daily storage tariffs for the various grain commodities proposed by GSI to SAFEX were agreed to and assented to by some or all of the respondents. Given that the first to sixteenth respondents are competitors in the provision of storage services, the joint determination of the SAFEX daily grain storage tariffs amounts to prohibited price fixing in that it quite simply amounts to an agreement between firms in a horizontal relationship for the direct fixing of grain storage prices.

2.4.4. The manner in which the standardised SAFEX daily grain storage tariffs were determined is, in the Commission's view, restrictive of competition. In addition to agreeing to the SAFEX daily grain storage tariffs, the respondents exchanged detailed cost information. In addition, the daily grain storage tariffs which were determined for SAFEX purposes have been used to determine storage fees in respect of sales transactions in the physical market. This, in the Commission's view, amounts to collusion.

2.5. The Commission took a decision to refer to the Tribunal its complaint that is described above.

3. Statement of conduct by Kaap Agri

3.1. Kaap Agri admits that, as a member of the GSI, it participated to a very limited extent in agreeing on the standardised daily wheat storage tariffs which were recommended to SAFEX and that the SAFEX dally grain storage tariffs were used in respect of transactions in the physical market.

3.2. Kaap Agri was bona fide in its actions and did not intend to contravene the Act It agrees that its conduct may, inadvertently, have been in contravention of section 4(1 )(b)(i) of the Act.

4. Administrative Payment

4.1. Having regard to the provisions of sections 58(1 ){a)(iii) as read with sections 59(1 )(a), 59(2) and 59(3) of the Act, Kaap Agri accepts that a contravention of section 4(1)(b)(i) may iead to the imposition of an administrative penalty where the Tribunal deems it appropriate. 4.2. in order to settle the matter, the parties have agreed that Kaap Agri will pay an administrative penalty in the amount of R1,199,075.36 (one miliion one hundred and ninety-nine thousand seventy five rand and thirty six cents) 4.3. This amount does not exceed 10% (ten percent) of the total grain silo storage turnover of Kaap Agri for the 2009 financial year. 4.4. Kaap Agri wili pay the amount set out in paragraph 4.2 above to the Commission upon the first business day following confirmation of this Consent Agreement by the Tribunal. 4.5. This payment shall be made into the Commission's bank account, details of which are as follows: Bank name: Absa Bank Branch name: Pretoria Account holder Competition Commission Fees Account Account number: 4050778576 Account type: Current Account Branch Code: 323 345 4.6. The payment will be paid over by the Commission to the National Revenue Fund in accordance with section 59(4) of the Act. 5. Agreement Concerning Future Conduct 5.1. Kaap Agri agrees to fully cooperate with the Commission in relation to the prosecution of the complaint referral. Without limiting the generality of the foregoing, Kaap Agri specifically agrees to: 5.1.1. Testify in the complaint referral (if any) in respect of alleged contraventions covered by this Consent Agreement; and

4.1. Having regard to the provisions of sections 58(1 ){a)(iii) as read with sections 59(1 )(a), 59(2) and 59(3) of the Act, Kaap Agri accepts that a contravention of section 4(1)(b)(i) may iead to the imposition of an administrative penalty where the Tribunal deems it appropriate.

4.2. in order to settle the matter, the parties have agreed that Kaap Agri will pay an administrative penalty in the amount of R1,199,075.36 (one miliion one hundred and ninety-nine thousand seventy five rand and thirty six cents)

4.3. This amount does not exceed 10% (ten percent) of the total grain silo storage turnover of Kaap Agri for the 2009 financial year.

4.4. Kaap Agri wili pay the amount set out in paragraph 4.2 above to the Commission upon the first business day following confirmation of this Consent Agreement by the Tribunal.

4.5. This payment shall be made into the Commission's bank account, details of which are as follows:

Bank name: Absa Bank

Branch name: Pretoria

Account holder Competition Commission Fees Account

Account number: 4050778576

Account type: Current Account

Branch Code: 323 345

4.6. The payment will be paid over by the Commission to the National Revenue Fund in accordance with section 59(4) of the Act.

5. Agreement Concerning Future Conduct

5.1. Kaap Agri agrees to fully cooperate with the Commission in relation to the prosecution of the complaint referral. Without limiting the generality of the foregoing, Kaap Agri specifically agrees to:

5.1.1. Testify in the complaint referral (if any) in respect of alleged contraventions covered by this Consent Agreement; and

5.1.2. To the extent that it is in existence, provide evidence, written or otherwise, which is in its possession or under its control, concerning the alleged contraventions contained in this Consent Agreement 5.2. Kaap Agri agrees that it will in future refrain from the provision of undertakings that have the potential to constitute contraventions of section 4(1 )(b) of the Act 5.3. Kaap Agri has developed, implemented and is monitoring a competition law compliance programme incorporating corporate governance designed to ensure that its employees, management, directors and agents do not engage in future contraventions of the Competition Act. In particular, Kaap Agri: 5.3.1. has drafted and implemented a competition policy and compliance programme; 5.3.2. has provided training on competition law compliance on issues particularly relevant to Kaap Agri and its employees and officials; 5.3.3. will, when necessary, provide training on competition law compliance to all persons and/or officials employed by Kaap Agri after the confirmation of this Consent Agreement by the Tribunal; 5.3.4. will update its competition policy and training annually to ensure Kaap Agris continued compliance with the Act 5.4. Kaap Agri will submit a copy of its compliance programme to the Commission within 60 days of the date of confirmation of the Consent Agreement by the Tribunal. 6. 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 Kaap Agri relating to anv alleged contravention by the Respondents of the Act that is the subject of the Commission's investigation under case no 2009MAR4349. Dated and signed at Malmesbury on the 23rd day of May 2011 For Kaap Agri CEO For the Commission's Competition Commissioner

5.1.2. To the extent that it is in existence, provide evidence, written or otherwise, which is in its possession or under its control, concerning the alleged contraventions contained in this Consent Agreement

5.2. Kaap Agri agrees that it will in future refrain from the provision of undertakings that have the potential to constitute contraventions of section 4(1 )(b) of the Act

5.3. Kaap Agri has developed, implemented and is monitoring a competition law compliance programme incorporating corporate governance designed to ensure that its employees, management, directors and agents do not engage in future contraventions of the Competition Act. In particular, Kaap Agri:

5.3.1. has drafted and implemented a competition policy and compliance programme;

5.3.2. has provided training on competition law compliance on issues particularly relevant to Kaap Agri and its employees and officials;

5.3.3. will, when necessary, provide training on competition law compliance to all persons and/or officials employed by Kaap Agri after the confirmation of this Consent Agreement by the Tribunal;

5.3.4. will update its competition policy and training annually to ensure Kaap Agris continued compliance with the Act

5.4. Kaap Agri will submit a copy of its compliance programme to the Commission within 60 days of the date of confirmation of the Consent Agreement by the Tribunal.

6. 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 Kaap Agri relating to anv alleged contravention by the Respondents of the Act that is the subject of the Commission's investigation under case no 2009MAR4349.

Dated and signed at Malmesbury on the 23rd day of May 2011

For Kaap Agri

CEO

For the Commission's

Competition Commissioner