Competition Commission v Overberg Agri Bedrywe (Pty) Ltd, In re: Competition Commission v Afgri Operations Ltd and Others (43/CR/Jun11) [2011] ZACT 68; [2011] 2 CPLR 280 (CT) (7 September 2011)

COMPETITION TRIBUNAL

REPUBLIC OF SOUTH AFRICA

Case No: 43/CR/Jun11

In the matter between:

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

and

Overberg Agri Bedrywe (Pty) Ltd ….....................................................................Respondent

Panel : N Manoim (Presiding Member), Y Carrim (Tribunal Member), and A Wessels (Tribunal Member) Heard on : 07 September 2011 Decided on : 07 September 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

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

OVERBERG AGRI BEDRYWE (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 13th 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(l){a)()H) and 58(1)(b) OF THE COMPETITION ACT, 1998 (ACT NO. 89 OF 1998), AS AMENDED, BETWEEN THE COMPETITION COMMISSION ("THE COMMISSION") AND OVERBERG AGRI BEDRYWE (PTY) LIMITED ("OVERBERG"), IN RESPECT OF AN ALLEGED CONTRAVENTION OF SECTION 4(1)(b)(i) OF THE COMPETITION ACT, 1998 ('THE ACT").

The Commission and Overberg hereby agree that application be made to the Tribtmaifor 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 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 1s* 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)(i) 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 Overberg;

1.6. "Grain Sito 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, Aikantrantstraat, 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. "Overberg" means Overberg Agri Bedrywe (Pty) Limited, a company registered and incorporated in accordance with the laws of the Republic of

South-Africa with registration number 1997/021082/07 and with its registered office and main ptace of business at 11 Donkinstreet,

Caledon, 7230.

1.8. "Parties" means the Commission and Overberg;

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

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 28 of the Act, with its principal

place of business at 3rd Floor, Mufayo building (Block C), the dti Campus, 77 Meintjtes 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 the storage rate is agreed to and assented to not only by the entities against whom the original

complaints initiation was made, but by all members and shareholders of GSI. 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 fix the prices of the daiiy 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 sifos 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. 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 2008, as is set out below, the GSI declined to provide 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) of the Act.

2.4.3. it was the GS/'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 GSt consulted its shareholders. The shareholders submitted individual proposals as to the appropriate storage rate to GSI. These rates were collated and evaluated by the GS/'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 services, 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 Overberg

3.1. Overberg 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-maii 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. Overberg 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 Overberg 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. 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, Overberg accepts that a contravention of section 4(1 )(bK0 may lead to the imposition of an administrative penalty where the Tribunal deems it appropriate.

4.2. Overberg will therefore pay an administrative penalty in the amount of R241 186.20.

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. Overberg 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 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. Overberg agrees to fufiy cooperate with the Commission in refation to the prosecution of the complaint referral. Without limiting the generality of the foregoing, Overberg 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. Overberg agrees that it will in future refrain from the provision of contractual undertakings that have the potential to constitute contraventions of section 4(?)(b) of the Act.

5.3. Overberg 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 future contraventions of the Competition Act. In particular, Overberg.

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

5.3.2. has already provided training on competition faw compliance on issues particularly relevant to Overberg and its employees and officials;

5.3.3.. shall provide training on competition law compliance to all persons and/or officials employed by Overberg m 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 Overberg's continued compliance with the Act.

5.4. Overberg shall submit a copy of such compliance programme to the Commission within 50 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 Overberg relating to any 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 Caledon on the 22nd day of June 2011

From Overberg

Chief Executive Officer

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

For the Commission's

Competition Commissioner