COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
	Case No: 017004	
In the matter between:		
The Competition Commission	Applicant	
and		
Norvo Construction (Pty) Ltd	Respondent	
Panel:	N Manoim (Presiding Member), Y Carrim (Tribunal Member) and T Madima (Tribunal Member)	
Heard on:	17 July 2013	
Decided on:	22 July 2013	
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 T Madima

HELD IN PRETORIA

CT Case No:

CC Case no: 2009Feb4279/2009Sep4641

Application for confirmation of a consent agreement

In the matter between:

THE COMPETITION COMMISSION					Application
and

PREAMBLE

1. Definitions'"'

1.1 “Act" means the Competition Act, 1998 (Act No. 89 of 1998), as amended;
1.2. “CFTP” means the Construction Fast Track Process announced by the Commission on 1 February 2011 to fast track the settlement process and to resolve the Commission's investigations into the construction industry;

1.4. 
1.5. 

1.8.  

1.10. 

1.16. “Subsector” refers to the classes of construction work defined in Schedule 3 of the CIDB Regulations, substituted by Government Notice No. 8986 of 14 November 2008, published in Government Gazette No. 31Q03 of 14 November 2008;

2. The Complaints
 
2.2. On 01 September 2009, following the receipt of applications for immunity in terms of the CLP, the Commission initiated the Complaint in terms of section 49B(1) of the Act into prohibited practices relating to collusion in the construction industry. The Complaint concerned alleged contraventions of section 4(1)(b) of the Act as regards collusive tendering, price fixing and market allocation in respect to tenders. The investigation was initiated against the following firms: Murray & Roberts, Grinaker LTA Ltd, Aveng (Africa) Ltd, Stefanutti Stocks Holdings Ltd, Group Five Ltd, Con cor Ltd, G. Liviero & Son Building (Pty) Ltd, Giuricich Coastai Projects (Pty) Ltd, Hochtief Construction AG, Dura Soletanche-Bachy (Pty) Ltd, Nishimatsu Construction Co Ltd, Esorfranki Ltd, VNA Pilings CC, Rodio Geotechnics (Pty) Ltd, Diabor Ltd, Gauteng Piling (Pty) Ltd, Fairbrother Geotechnfcal CC, Geomechanics CC, Wilson Bayly Holmes-Ovcon Ltd and other construction firms, including joint ventures.

 

3.2. Section 4(1 )(b) provides-

(a) 
(b) 
(i) directly or indirectly fixing a purchase or selling price or any other trading condition;
(ii) 
(iii) 
3.3. The collusive conduct engaged in, in the context of the Invitation and this Consent Agreement, was collusive tendering or “bid-rigging". Collusive tendering involves particular conduct by firms whereby as competitors they collude regarding a tender resulting in the tender process being distorted. The bid prices and the bid submissions by these competitors as well as the outcome of the tender process is not the result of competition on the merits. “Cover pricing” in this context occurs when conspiring firms agree that one or more of them will submit a bid that is not intended to win the contract. The agreement is reached in such a way that among the colluding firms, one firm wishes to win the tender and the others agree to submit non-competitive bids with prices that would be higher than the bid of the designated winner, or the price wifi be too high to be accepted, or the bid contains special terms that are known to be unacceptable to the client, Collusive tendering therefore applies to agreements or concerted practices which have as their object or effect the prevention, lessening, restriction and distortion of competition in South Africa.

3.4. In terms of section 2 of the Act, two of the key objects of the Act are to promote the efficiency, adaptability and development of the economy, and to provide consumers with competitive prices and product choices. Section 217 of the Constitution of the Republic of South Africa, 1996 calls for a procurement or tender system which is fair, equitable, transparent, -competitive and cost-effective,-

3.6. Therefore, in the interest of transparency, efficiency, disrupting cartels and incentivising competitive behavior in the construction industry and a cost- effective, comprehensive and speedy resolution of the investigations referred to above, the Commission decided to fast track these investigations and their resolution by inviting firms that were involved in collusive tendering in the form of bid-rigging of projects in the construction industry, to apply to engage in settlement on the terms set out in the Invitation.

3.7.1. submit an application in terms of PART 2 of the Invitation;
3.7.2. agree to pay an administrative penalty or penalties determined by the Commission as envisaged in paragraph 10.2 read with paragraphs 19-28 of the Invitation; and
3.7.3. comply with the requirements of the settlement process as set out in PART 1 and PART 3 of the Invitation.

3.10. An applying firm could request the Commission to consider its application in terms of the Invitation as an application for a marker or as an application for immunity under the CLP. Firms could also apply for a marker or for immunity under the CLP before making an application in terms of the invitation.
3.11. The deadline to apply for a settlement in terms of the Invitation was 12h00 on 15 April 2011.

4.1. Norvo applied for leniency and Settlement in terms of the invitation. Norvo specializes in the major building works including shopping centers, office blocks, residential buildings and turnkey industrial projects.
4.2. Norvo applied for leniency and Settlement and disclosed one (1) non prescribed prohibited practice which falls in the General Building sub-sector.
4.3. Norvo was not the first to apply for this prohibited practice, and is therefore settling it In terms of this Consent Agreement.
4.4. The prohibited practice or contravention by Norvo of section 4(1)(b)(iii) of the Act which is the subject of the Consent Agreement is set out below.

5. Disclosed Project

Norvo reached agreement with G Liviero & Son Building (Pty) Ltd (“G Liviero”) on or about May 2004 in that they agreed to add a loser's fee in the tender for the Tamboti project. In terms of the agreement they agreed that G Liviero would win the tender and then pay the loser’s fee in the amount of R113 971.50 to Norvo. In line with the agreement, the tender was awarded to G Liviero, and the loser’s fee was paid to Norvo. The last payment made by G Liviero was in November 2006. This conduct Is collusive tendering in contravention of section 4(1)(b)(iu) of the Act.

Norvo Construction admits that it was involved in collusive conduct In contravention of section 4(1)(b)(m) of the Act in that it tendered colfusiveiy in respect of the prohibited practice set out in paragraph 5 above.

7. Co-operation
In so far as the Commission is aware, and in compliance with the requirements as set out in the Invitation, Norvo:
7.1. has provided the Commission with truthful and timely disclosure, including information and documents in its possession or under its control, relating to the prohibited practices;
7.2. has provided full and expeditious co-operation to the Commission concerning the prohibited practices;
7.3. has provided a written undertaking that it has immediately ceased to engage in, and will not in the future engage in, any form of prohibited practice;

7.4. has confirmed that it has not destroyed, falsified or concealed information, evidence and documents relating to the prohibited practices;

7.5. has-confirmed that It has - not misrepresented or made a wilful or negligent misrepresentation concerning the material facts of any prohibited practice or otherwise acted dishonestly.
8. Agreement Concerning Future Conduct
  
8.1.1. To the extent that it is in existence and has not yet been provided, providing (further) evidence, written or otherwise, which is in its possession or under its control, concerning the contraventions contained in this Consent Agreement;
8.1.2. Norvo will avail its employees and former employees to testify as witnesses for the Commission In any cases regarding the contraventions contained in this Consent Agreement;
8.1.3. Norvo 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 Act.

8.3. Norvo shall submit a copy of such compliance programme to the Commission within 60 days of the date of confirmation of the Consent Agreement as an order by the Competition Tribunai. 

8.4. Norvo shall circulate a statement summarising the contents of this Consent Agreement to all management and operational staff employed at Norvo within 50 days from the date of confirmation of this Consent Agreement by the Tribunal,

8.5. Norvo will not in the future engage in any form of prohibited conduct and will not engage, in collusive tendering which will distort the outcome of tender processes but undertakes henceforth to engage in competitive bidding.

9.2. According to the Invitation, the level of the penalty is to be set on the basis of a percentage of the annual turnover of-Norvo in the relevant subsector in the Republic and its exports from the Republic for the financial year preceding the date of the Invitation.
9.3. The project which Norvo has been found to have contravened the Act, falls under the General Building CIDB subsector.
9.4. Accordingly, Norvo is liable for and-has agreed to pay an administrative penalty in the sum of R 714 897 (Seven Hundred and Fourteen Thousand Eight Hundred and Ninety Seven Rand) which penalty is calculated in accordance with the Invitation.
10. Terms of payment

10.1. Norvo will pay the amount set out above [In paragraph 9.4] to the Commission within 30 days from the date of confirmation of this Consent agreement fay the Tribunal.
10.2. 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
Brach Code:	323 345
10.3. The penalty will be paid over by the Commission to the National Revenue Fund in accordance with section 59(4) of the Act.
11. Full and Final Settlement
This agreement is entered into in full and final settlement of the specific conduct listed in paragraph 5 above, and upon confirmation as art order by the Tribunal, concludes all proceedings between the Commission and Norvo in respect of this conduct only.

For Norvo

For the Commission
Shan Ramburuth
Commissioner