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Cape Town - ArcelorMittal SA’s R1.5bn fine for price fixing is a boost for small business and for new investors, according to Economic Development Minister Ebrahim Patel on Monday.
As part of a settlement with the Competition Commission, ArcelorMittal SA [JSE:ACL] said it would also invest R4.6bn in new capital spending to upgrade its plants and improve its competitiveness. The settlement further provides for a pricing mechanism that will cap the company's margin on flat steel products for a period of five years.
"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,” the company said in a statement.
FULL STORY: ArcelorMittal to pay R1.5bn price fix fine
Patel said the action is part of a crackdown against abuse of market power and price-fixing that undermine the performance of the economy, imposes unnecessary costs on downstream factories and damages local jobs.
"South Africa's competitiveness and industrial performance require an efficient basic steel supplier industry,” he said.
“High levels of concentration together with collusion undermine our national goals,” he said. “Companies collude because they believe they can get away with it.
“Over the past seven years, the competition authorities have focused on collusion and abuse of market dominance involving key input costs in the economy, such as steel-making, fertilizers, construction and telecommunications and well as important basic goods such as bread, poultry and flour," he said.
"Our resolve is clear: we want to promote investment-led economic growth, not collusion-induced economic stagnation. South Africa is open for business and the message we want to send is that we will act against conduct that damages competition and jobs," Patel said.
“This can be a boost for small business and for new investors,” he said.
"We look forward to seeing more competitive prices and will be monitoring price increases through the committee set up under the International Trade Administration Act, drawing on the information available from the company's customers.
“We will not hesitate to act against any further abuse of market power in the steel industry should this be necessary. We have recently brought into effect the provisions in the Competition Act that criminalize collusion and impose jail terms of up to ten years on directors and employees found guilty thereof," Patel said.
For the next five years, ArcelorMittal SA will not be allowed 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 as measured over the company's financial year. However, ArcelorMittal will be permitted to exceed the 10% cap up to a maximum of 15% in certain defined circumstances.
"The agreement makes provision for monitoring by the Commission, which will allow for ongoing engagement and the sharing of information, as well as the opportunity to engage if there is a significant change in the economic, financial and market circumstances," said ArcelorMittal.
ArcelorMittal SA was trading 2.72% lower at R7.51 on Monday at 14:40, with a P/E ratio of -0.64 and market cap of R8.55bn.
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