COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA

Case No: 48/CR/Aug10

In the matter between:

and

		Member) and T Orleyn (Tribunal Member)

Decided on  :       	25 August 2010

Order

Presiding Member
Concurring: M Mokuena and T Orleyn
		BEFORE THE COMPETITION TRIBUNAL OF SOUTH AFRICA 
				(HELD IN PRETORIA)

Case No: 48/CR/Aug10
							CC CASE NO.:2007NOV3338

In the matter between:

and

The Competition Commission and Safripol (Pty) Ltd hereby agree that application be made to the Competition Tribunal for confirmation of this Consent Agreement as an order of the Tribunal in terms of sections 58(1)(a)(iii), 58(b) as read with sections 59(1)(a), 59(2) and 59(3) of the Competition Act No.89 of 1998, as amended, on the terms set out below,

1.	Definitions and interpretation
In this Consent Agreement, unless the context indicates otherwise, the following definitions shall apply:

The Commission records the background to its investigation as follows:

2.2. The DTI alleged that, as a result, consumers were being charged relatively high prices, as if South Africa were a high cost net importing country of these products.
2.3. The Commission consequently conducted a preliminary analysis into pricing practises within the chemicals sector with specific reference to polymers; and subsequently initiated a complaint investigation in terms of section 49B (1) of the Act on 12 November 2007.

2.4.1. excessive pricing through import-parity pricing of polypropylene and polyvinylchioride by Sasol;
2.4.2. excessive pricing through import-parity pricing in polyethylene terephthalate by SANS and Hosaf
2.4.3. horizontal and vertical restrictive practices in the pricing of polypropylene by Sasol and Safripol;
2.4.4. horizontal restrictive practices in polyethylene terephthalate by SANS and Hosaf; and
2.4.5. price discrimination in polypropylene and polyvinylchioride by Sasol.

At the conclusion of its investigation the Commission made the following findings:

3.1 Historic background

3.1.1. On 08 December 1994, Sasoi and Safripol entered into the Supply Agreement in terms of which Saso! agreed to supply Safripol with certain quantities of propylene. The Supply Agreement was concluded pursuant to the Competition Board's concerns with regards to the AECl/Sasol merger investigation, where AECI and Sasol sought to merge certain portions of their chemical businesses in Polifin Limited (the predecessor of Sasol Chemical Industries Limited). The Competition Board, on the basis of the undertakings made by the merged entity to supply Safripol/ Sentrachem with monomer feedstocks (including propylene) on a non-discriminatory basis, concluded that it was not necessary to launch a forma! investigation into the proposed merger.
3.1.2. In terms of the Supply Agreement, Sasol and Safripol agreed to a pricing formula which entails, among other things, that the price Safripol pays to Sasol for propylene is based on the domestic polypropylene prices of Sasol and Safripol, which prices the parties share quarterly. The price of propylene is derived by applying to the polypropylene prices a ratio of the average propylene prices to polypropylene prices in North West Europe and the USA over the previous three years. To this price is added a percentage of the standard freight charge for polypropylene from Rotterdam to Durban.

3.2.3. Safripol and Sasol exchange information retrospectively on average quarterly prices of polypropylene sales to the local market.
3.2.4. The arrangements have resulted in Safripoi's average prices for polypropylene (packed and delivered, exchanged quarterly) closely tracking Sasoi's average prices for polypropylene.

Shortly before the referral of the Complaint to the Tribunal, Safripol met with the Commission and the parties engaged in discussions with a view to settling the matter. This Consent Agreement is the outcome of those discussions.

Safripol admits that the Supply Agreement, which contains restrictive terms regarding pricing and volumes, and the implementation of the Supply Agreement, including the Pricing Formula, constrain the ability of Safripol to compete effectively with Sasol in the polypropylene market. Safripol accordingly admits that the implementation of the Supply Agreement amounts to the indirect fixing of a price or trading condition in contravention of section 4(1)(b)(i) of the Act.

6.1.1. to prepare and circulate a statement summarising the content of this Consent Agreement to its employees who are managers and to its directors and relevant corporate governance structures within 30 days of the date of confirmation of this Consent Agreement as an Order of the Tribunal;
6.1.2. to develop and implement a compliance programme incorporating corporate governance designed to ensure that, subject to clause 6.2, its employees, management and directors do not engage in any conduct which constitutes a prohibited practice in terms of the Act, a copy of which programme shall set out the parameters within which the Supply Agreement shall continue to be applied, and shall be submitted to the Commission within ninety (90) days of the date of confirmation of this Consent Agreement as an order of the Tribunal;

6.1.3. save for the implementation of the Supply Agreement strictly in accordance with its terms and as contemplated in clause 6.2, to refrain from sharing with Sasol competitively sensitive information relating to the pricing of polypropylene;and
6.1.4. to use its best endeavours to renegotiate, within 6 months from the date upon which this Consent Agreement is made an order of the Tribunal, or within such longer period as the Commission may agree (provided that the Commission shaii not withhold its agreement on good cause shown) the terms of the Supply Agreement, and in particular the Pricing Formula and volume restrictions, in a manner which will promote competition and ensure that the implementation thereof will not result in a contravention of the Act.

6.2.1. accordingly have the right to continue to implement the terms of the Supply Agreement and the Pricing Formula until conclusion of the renegotiations referred to in clause 6.1.3; and
6.2.2. notify the Commission of any failure or refusal on the part of Sasol to engage constructively with Safripol in the process of re~negotiation of the terms of the Supply Agreement.

7.1. Safripol undertakes to co-operate fully with the Commission in its prosecution of the remaining Respondent in the complaint referral.

7.2.1. providing the Commission with all relevant evidence available to it that might assist the Commission in its prosecution of the remaining respondents in the Complaint referral;
7.2.2. ensuring that all current Safripol employees, and where necessary, using its best endeavours to procure that former employees, who have knowledge of the pricing practices between Sasol and Safripol referred to above, are available to and co-operate with the Commission, both for purposes of consultation and to give evidence in proceedings before the Tribunal.

8.1. Safripol is liable for an administrative penalty in terms of sections 58(i)(a)(Hi), 59(2) and (3) of the Act in the amount of R16 474 573,11 (sixteen million four hundred and seventy four thousand five hundred and seventy three rand and eleven cents)). The administrative penalty represents 1,5% of Safripol's total annual turnover for its financial year ending 2009 for turnover derived from polypropylene products.

This Settlement Agreement, upon confirmation thereof as a consent order by the Tribunal, concludes all proceedings between the Commission and Safripol in relation to the contravention of section 4(1)(b)(i) and Section 5(1) of the Act, investigated under the Commission's case number: 2007Nov3338.

Geoff Gaywood
Chief Operating Officer
Duly authorised signatory of Safripol

Shan Ramburuth
Commissioner, Competition Commission

"Annexure B" to the Consent Agreement entered into between the Competition Commission and Safripol (Pty) Ltd

Annexure A is amended as follows:

replaced by "6.1.4".