PPC confesses to cartel activity

Johannesburg - Cement producer Pretoria Portland Cement (PPC) on Wednesday admitted that internal investigations have revealed that the company was involved in market-sharing arrangements with other cement producers in the late 1990s.

The Competition Commission also confirmed that it has granted PPC conditional leniency from prosecution under the Competition Act, in exchange for PPC's complete and truthful disclosure of all cartel activities between PPC and its competitors.

"PPC applied for leniency shortly after the Commission raided and seized documents and electronic data from PPC's premises and those of its competitors Lafarge Industries South Africa, AfriSam Consortium and Natal Portland Cement Cimpor in June this year.

"The raids were in pursuance of the Commission's investigation of possible collusion in the cement industry," the Competition Commission said in a statement.

The commission said that PPC, in its application for leniency, confirmed the existence of a cartel to divide markets among the four cement producers.

"According to this information, the four cement producers agreed to divide the cement market amongst themselves in order to maintain the market shares that each producer held prior to 1996 when a lawful cement cartel existed and was regulated by exemptions to the competition legislation," the Competition Commission said.

The agreement was implemented up until this year through highly disaggregated sales information each producer submitted to the Cement and Concrete Institute of South Africa (C&CI) through an audit firm appointed by C&CI. The four cement producers are the main members of C&CI.

In addition, the Competition Commission said there was an agreement that PPC would not compete in the Northern Natal market in exchange for Lafarge not competing with PPC in the Botswana market.

In exchange for immunity from prosecution PPC has agreed to cooperate fully with the commission until the investigation and tribunal proceedings are finalised.

In terms of the agreement PPC must also stop its involvement in cartel activity and refrain from submitting competition sensitive information to the C&CI.

"The problem with competitors dividing markets between themselves is that they successfully shield themselves from competition and can thus price above competitive levels with no opposition or alternative from a competitor," said the commission, which is now conducting further investigations.

PPC said it appointed external legal advisers to conduct an investigation following notification of the commission's investigation in June.

The company said its investigation revealed the market-sharing arrangements with other cement producers.

It said these arrangements were introduced into the organisation under the guise of being autonomous behaviour involving "a few former employees who knew about the arrangements and made ongoing arrangements to disclose detailed sales information through the C&CI."

"Management and the board have taken full responsibility and we believe that we have acted quickly, decisively and correctly by cooperating with the commission," said PPC CEO Paul Stuiver.

"We were shocked and disappointed when these issues were revealed and we apologise. We want to reassure the public and all who work for PPC that we do not tolerate this kind of behaviour. We will get rid of it and ensure that this does not happen again," said Stuiver.

- I-Net Bridge