South African Commission Raids Steel Companies to Uncover Cartel

The Competition Commission has received a Corporate Leniency Policy application pursuant to the raids it conducted at Cape Town Iron and Steel Works, Highveld and the South African Iron and Steel Institute in June, 2008. The raids were conducted as part of an investigation into allegations of price fixing and exclusive dealing in the steel industry.

The CLP applicant confirms the existence of a cartel among competitors for the following products:

• Reinforcing bar;

• Wire rod;

• Sections (rounds and squares, angles and profiles);

• Roofing bolts; and

• Fencing products (including droppers)

According to information submitted by the leniency applicant, discussions and meetings took place between the parties where agreements were reached to fix prices, exchange price lists and fix discounts. The information received by the Commission also indicates that parties allocated customers by agreeing on which customers to supply for various long steel products, and shared commercially sensitive information through SAISI. The information submitted to the Commission further suggests that the alleged conduct affected the allocation of work to some major construction projects in the country.

The Commissioner, Shan Ramburuth, said that, "These steel products are critical in the infrastructure sector, which has been identified as a priority area by the Commission and as a key driver of government’s ASGISA programme."

Documents in the possession of the Commission also indicate the existence of collusive agreements and arrangements that various steel suppliers reached in the pricing and purchases of scrap metal. These include agreements on standard pricing formula to be used in determining the purchase price of scrap and the allocation of scrap metal among the major consumers.

The Corporate Leniency Policy is one tool which is increasingly being used by the Competition Commission, and other international competition authorities, to encourage firms to confess their involvement in cartel activities and to assist in identifying and prosecuting other cartel members. In return a CLP applicant is offered total or partial immunity from prosecution.