Competition Commission v Moorreeburgse Koringboere (Pty) Ltd, In re: Competition Commission v Afgri Operations Ltd and Others (43/CR/Jun11) [2011] ZACT 69; [2011] 2 CPLR 269 (CT) (7 September 2011)

COMPETITION TRIBUNAL

REPUBLIC OF SOUTH AFRICA

Case No: 43/CR/Jun11

In the matter between:

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

and

Moorreeburgse Koringboere (Pty) Ltd …......................................................................Respondent

Pane! : N Manoim (Presiding Member), Y Carrim (Tribunal Member), and A Wessels (Tribunal Member)

Heard on 07 September 2011

Decided on : 07 September 2011

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

Presiding Member

N 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

MOORREESBURGSE KORINGBOERE (PTY) LIMITED

in re:

THE: COMPETITION COMMISSION

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

SENWES LIMITED …................................................................................................................................2pd Respondent

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

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

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

VRYSTAAT KOOPERASIE BEPERK …....................................................................................................6th Respondent

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

DIE HUMAN SDORPSE KOOPERASIE BEPERK 8th Respondent

SENTRAAL SUID C00-OPERATIVE LIMITED 9th Respondent

GWK LIMITED 10th Respondent

KAAP AGRI BEDRYF LIMITED 11th Respondent

MGR BEDRYFSMAATSKAPPY (PTY) LIMITED 12th Respondent

TUINROETE AGRI BEPERK l3th Respondent

MOORREESBURGSE KORlNGBOERE (PTY) LIMITED 14th Respondent

TWKLANDBOU BEPERK 15th Respondent

NTK LIMPOPO AGRIC BEPERK 16th Respondent

GRAIN SILO INDUSTRY (PTY) LTD …....................................................................................................17th Respondent

CONSENT AGREEMENT IN terms OF SECTION 49D READ WITH SECTION 58(1)(a)(iii) and 58(1)(b) OF THE COMPETITION ACT, 1998 (ACT NO. 89 OF 1998), AS AMENDED, BETWEEN THE COMPETITION COMMISSION ("THE COMMISSION'') AND MOORREESBURGSE KORINOBOERE (PTY) LIMITED ("MKB"), IN RESPECT OF AN ALLEGED CONTRAVENTION OF SECTION 4(1)(b)(i) OF THE COMPETITION ACT, 1998 ("THE ACT").

The Commission and MKB 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 )(b) of the Competition Act, 1998 (Act No. 89 of 1998), as amended, on the terms set out below:

1. Definitions

For the purposes of this Consent Agreement the fallowing 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 1sl Floor,. Mulayo Building (Block C), the dti Campus, 77 Meintjies Street, SunriVside, Pretoria, Gauteng;

1.3. "Commissioner” means; the Commissioner of the Commission appointed- in terms of section 22 of the Act;.

1.4. 'Complaint” means the complaint under ease number 2009Mar4349 initiated by the, Commissioner in terms of section 49B of the Ac!,, including a complaint concerned with allegations of price fixing in terms of section 4(i)[b).(i) of the Act initiated on 17 March 2009 as well as an, expanded, initiation oh 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 MKB;

1.6. "Grain Silo industry" means Grain Silo. Industry (Pty}: Ltd, 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, Aikantrahfsfraat- Lynwood Manor, Pretoria, Gauteng Province. The GSI 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 GSI represents its constituent members in interactions with the Agricultural Products Division of the Johannesburg Stock Exchange (the "APD" previously "SAFEX").

1.7. MKB" means Moorreesburgse Koringboere (Pty) Limited, a company' registered and incorporated in accordance with the laws of the Republic of South-Africa with registration number 1999/007729/07 and with its registered office and main place of business at corner of Main and Long. Street, Moorreesburg, 7310;

1.8. "Parties" means the Commission and MKB;-

1.9. "Respondent" means for purposes of this agreement MKB;

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* Sunnysidei Pretoria, Gauteng.

2. The Complaint and Complaint investigation

2.1. On 17 March 2009 the Commissioner initiated a complaint against Afgri Operations- Limited fAfgri"), Senwes Limited ("Senwes"), Noordwes Kooperasie Limited ("NWK"), OVK Operations Limited ("OVK) SuidWes (Pty) Limited ("Suidwes"),. Vrystaatse Kbepefasie 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 the storage rate is agreed to and assented to hot only by the entities against whom the original

complaints initiation was made, but by all members and shareholders of GSI. In the circumstances, oh 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 fix 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 ail former cooperatives who own grain, storage: silos and provide other agricultural services, arid 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. SAFEX Placed the onus for the determination of the storage' rate on the GSI on the basis that it had the necessary knowledge and understanding of the costs involved In providing storage,: Until 2008 SAFEX requested the standardised tariff from the GSI on an annual basis, in 2G0fis, as is set out below, the GSI declined to provide the standardised storage tariff to SAFEX any longer oh account: of the Commission's contentions that it and its members were contravening section 4(1)(b)(i) of the Act:

2.4.2. It was the GSI's technical committee that was responsible for fixing the daily storage tariff on behalf of the GSI and its members, In response: to requests from SAFEX, the GSI consulted its shareholders. The shareholders submitted individual proposals as to the; appropriate storage rate to 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 a rate and this was then submitted to' SAFEX on behalf of GSI and its shareholders;

2.4.3. The essence of the conduct complained of is that the daily storage tariff proposed by GSI is agreed to and assented to by all of the respondents. Given that the first to sixteenth respondents are all competitors in the provision of storage service's, the joint' determination of the daily storage rate 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 storage prices.

2.4.4. The: manner in which, the. SAFEX storage tariff is determined is, in the Commission's view, restrictive of competition. In addition to agreeing to the SAFEX rate, the respondents exchanged detailed cost information. In addition, the storage tariff determined for SAFEX purposes has been used to determine storage fees in respect of sales transactions in the physical market: This amount 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 SVIKB

3.1. MKB. admits, that, as a. member of the GSI, it was asked on three occasions for input regarding the. standardised daily wheat storage tariff which were to be recommended to SAFEX, namely:

3.1.1. Via e-mail during February- 2003;

3.1.2. when, as a member of GSI, it attended a GSI Technical Committee meeting on 10 May 2007 at which the standardised, daily wheat storage tariff Which were to be recommended to SAFEX was discussed;

3.1.3. via e-mail in June 2007 when it was requested to- indicate if" its systems could accommodate % cent tariffs.

3.2. MKB therefore participated, to the aforesaid limited extent in agreeing on the standardised daily Wheat storage tariffs which were, recommended to SAFEX. As it had (and still has) no other option in the market circumstances, it also used the SAFEX daily wheat storage tariffs in respect of transactions in the physical market.

3.3. Although MKB acted bona fides, it accepts that its aforesaid conduct may be perceived as constituting a contravention of section 4(1 )(b)(i) of the Act;

4.. Administrative Penalty

4.1. Raving 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; MKB accepts that a contravention of section: 4(1)(b)(i) .may lead to the imposition of an administrative penalty where, the tribunal deems it appropriate;

4.2. MKB will therefore pay an administrative penalty in the amount of R159 364.60.

4.3. This amount constitutes 4%, (four per cent) of the total wheat daily storage tariff silo turnover for the 2009 financial year;

4.4. MKB will, pay the amount set out in. paragraph 4.2 above to the Commission upon the date of confirmation of this. Consent Agreement by the Tribunal.

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

Ban&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 irt accordance,with section 59(4) of the Act.

5. Agreement Concerning Future Conduct

5.1. MKB agrees to fully cooperate with the Commission in relation to the prosecution Of the complaint referral Without limiting the generality of the foregoing, MKB. 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. MKB agrees that it will in future refrain from the. provision of contractual undertakings that have the potential to constitute contraventions of section 4(1)(b) of the Act:

5.3. MKB shall develop, implement and monitor a competition law compliance programme; incorporating corporate, governance designed to. ensure that its employees,. management,'directors and agents do not engage in futurecontraventions: of the Competition Act. In particular, MKB, shall:

5.3.1. draft and implement a competition policy and compliance programme;

5.3.2. provide training on competition law compliance on issues particularly relevant to MKB and its employees arid officials;

5.3.3. provide training on competition law compliance to all persons and/or officials employed by MKB in managerial and marketing capacities after the confirmation of this Consent Agreement by the Tribunal;

5.3.4. update the competition policy and training annually to ensure MKB's continued compliance with the Act. .

5.4. MKB shall submit a copy of such 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 MKB relating to any alleged contravention by the Respondents of the Act that is the subject of the Commission's investigation under case ho 2009Mar4349.

Dated and signed at Moorreesburg on the 22nd day of June 2011

From MKB

Chief Executive Officer

Dated and signed at Pretoria on the 23rd day of June 2011

For the Commission's

Competition Commissioner