Share

ArcelorMittal to pay R1.5bn price fix fine

Johannesburg - ArcelorMittal SA’s R1.5bn fine for price fixing sends a strong message of deterrence and is an important milestone in the commission’s enforcement against cartels, Commissioner Tembinkosi Bonakele said on Monday.

On Monday, it was announced that all investigations and prosecutions relating to a settlement agreement between ArcelorMittal SA (AMSA) and the Competition Commission have now been finalised and ArcelorMittal [JSE:ACL] will pay an administrative penalty of R1.5bn for price fixing.

AMSA has agreed to pay the penalty over five years as from 2017 at instalments of no less than R300m per annum, the Commission said on Monday.

“The commission is delighted to bring an end to these longstanding proceedings. The penalty sends a strong message of deterrence and is an important milestone in the Commission’s enforcement against cartels,” said Bonakele.

“In addition, the pricing remedy reflects our desire to protect South African consumers against dominant firms, particularly on key industrial products. This remedy is a safeguard in the event that AMSA were to revert to the historical prices that the Commission regards as excessive.”

The agreement relates to various cases the commission investigated, some relating to complaints dating as far back as 1999. Some complaints were subsequently referred to the Tribunal for adjudication.

ArcelorMittal admitted guilt to only two of six matters: the long steel matter, which relates to allegations of fixing prices, allocating customers and sharing commercially sensitive information, and as a consumer of scrap in relation to a scrap metal allegation of price fixing.

Long steel matter

A 2008 investigation against long and flat steel producers in SA, including AMSA, included a raid on premises of a number of steel producers.

The commission’s investigation found that AMSA and some of its competitors in the manufacturing of long steel products, engaged in collusion by fixing prices and discounts, allocating customers and sharing commercially sensitive information through the South African Iron and Steel Institute (SAISI) and the SA Reinforced Concrete Engineers’ Association.

Scrap metal

A 2009 investigation against a number of consumers of scrap, including AMSA, for collusive practices, found they fixed the purchase price of scrap metal by collectively negotiating and agreeing a standard formula which was used to determine the purchase price of scrap metal as a buyers’ cartel.

In August 2013, the Commission referred this matter to the Tribunal for adjudication.

Price differentiation

Other complaints, to which AMSA has not pleaded guilty, include those received by the Commission in December 2003, which alleged that AMSA differentiated between its customers in terms of discounts offered for low carbon wire rod and that this conduct amounted to price discrimination in contravention of the Competition Act.

The Commission’s investigations found that AMSA engaged in the conduct of price discrimination in contravention of the Competition Act. This complaint concerned the period 2000 to 2003.

Flat steel

A 2011 investigation pertained to AMSA allegedly charging excessive prices for its flat steel products in contravention of the Competition Act. The Commission has not made a finding in this matter.

Although AMSA has not admitted contravention of the Competition Act in the pricing complaints, it has agreed to remedies to address competition concerns arising from its pricing conduct.

READ: ArcelorMittal sees boost from higher steel prices

For a period of five years AMSA will not be permitted to earn an earnings before interest and tax margin percentage greater than 10% relating to flat steel products sold in SA over a 12 months period (linked to AMSA’s financial year). The 10% margin cap is subject to variation up to a maximum of 15% if certain market circumstances set out in the settlement agreement arise.

As part of the settlement agreement, AMSA has also committed to a R4.64bn capital expenditure over five years.

"Notwithstanding, in the light of the previous concerns regarding pricing and the company's commitment to work with Government and all stakeholders to contribute to growth of the SA economy, the company has agreed to a pricing remedy for local flat steel products," said ArcelorMittal.

"The company has been proactive and various interventions have already been implemented within the company to ensure that there is more vigilance to guard against such conduct happening again."

This includes an enhanced training and compliance programme as well as ongoing enhanced communication.

According to AMSA, in the light of the vulnerable state of the steel industry and the position of the company, no interest will be levied on the administrative penalty for the first 18 months from the date on which the settlement agreement is made an order of the Tribunal. Thereafter interest will be levied on the remaining outstanding balance at the prevailing interest rate prescribed by the minister of finance - currently 10.5%.

"Shareholders should, therefore, note that the settlement agreement is subject to the approval of the Tribunal. Subject to the final order being granted, this will bring an end to these legal matters, which have been pending against the company for some time," said ArcelorMittal.

The shares were changing hands 1.42% lower on R7.61 just after 12:00.

ALSO READ: ArcelorMittal says Saldanha steel plant will keep operating

Read Fin24's top stories trending on Twitter:

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.92
+0.1%
Rand - Pound
23.87
+0.2%
Rand - Euro
20.39
+0.2%
Rand - Aus dollar
12.32
+0.1%
Rand - Yen
0.13
+0.1%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders