Pretoria - Construction companies are now undertaking a
second round of self-examination into uncompetitive behaviour.
This emerges from a recent trading statement issued by
Murray & Roberts Holdings [JSE:MUR] and discussions with various industry leaders.
On January 31 M&R announced that the Competition
Commission had brought possible violations – other than those to which it
confessed last year – to its attention. The group is investigating, but has not
increased its provision for possible fines.
The Competition Commission declined to comment as the
investigation is still under way.
Sake24 has however received confirmation from various
sources that the commission has made similar references to other contractors.
It would seem that contractors were under tremendous
pressure to confess their transgressions before the April deadline last year in
the commission’s accelerated settlement process. They generally followed a
policy of “when in doubt, confess before someone else does so and involves
As a result contractors now have to sift through a wealth of
vague allegations and defend actions that sometimes took place years before -
while those involved have long departed the company.
Chris Charter, a director in the competition department of
legal firm Cliffe Dekker Hofmeyr says this is characteristic of the type of
process that the Competition Commission follows and it is a massive task to
sift the wheat from the chaff.
There is often confusion when contractors give different
names for the same project. One company admits, for instance, to sharp bidding
practice in a project and uses the road number as reference. Another confesses
regarding the same project, but uses the names of towns on the route as
The commission does not realise they refer to the same
project and reckon each of the two contractors has confessed to only one of two
projects. The other is referred back to the respective contractors as a
possible additional transgression.
Certain construction leaders believe the commission is on a
witch-hunt and stirring things up. Meanwhile contractors, who are already doing
business in difficult market conditions, have to pay huge amounts for the
services of forensic investigators and competition experts.
Charter says contractors’ questions about the prescription
of offenses can become a further point of dispute.
According to the Competition Act offences prescribe three
years after the practice has ceased. Since the investigation started in 2009,
the focus is on transgressions in 2006.
Contractors reckon the commission’s interpretation that
collusion in any tender affects the entire project in its wake is too broad. In
terms of this interpretation a tender awarded, for instance, in 2002 and
completed in December 2005, the retention period of which expires only a couple
of months later, is included.
Charter reckons this will depend on the specific type of
transgression. Contractors sometimes agree to take turns in winning tenders.
After the project is completed, retention time and all, the successful tenderer
then has to pay a consideration to the unsuccessful tenderer. The transgression
thus continues into 2006.
In cases where competitors submit dummy tenders, the offence
is dealt with in the tender stage.
He says there have been previous decisions about
prescription, but not in this context.
Regarding the other question, whether the commission has
jurisdiction about bidding practices by South African companies that collude at
home on projects in foreign countries, he says the commission clearly has
jurisdiction over these so-called export cartels.
Years ago citrus producers had to pay up after the
Competition Tribunal found them guilty of uncompetitive behaviour because they
had agreed to work together with regard to orange exports to the United States.
Charter however doubts whether foreign contracts will receive preference in the
Construction leaders to whom Sake24 spoke are resolved to
fight the Competition Commission’s views where necessary.
Charter says invitation to the accelerated settlement
process indicates that contractors who do not agree to the terms face legal
action. It is hoped the commission will be prepared to discuss the issues when
making settlement proposals, since that such settlement processes are untested
in South Africa.
“I don’t think the commission is busy with a witch-hunt.
There is a justifiable attempt to ensure that the history of collusion in the
construction industry is exposed and combated,” he says.
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