Dawn to appeal competition ruling

DISTRIBUTION and Warehousing Network (Dawn) has given notice that it intends to appeal a Competition Tribunal ruling that the group engaged in a market allocation arrangement with Sangio Pipe.

The tribunal has not yet determined any financial penalty for the Competition Act contravention, but confirmed a hearing would be held relating to the remedies to be imposed on the companies.

But the listed manufacturer and distributor of plumbing and hardware brands said yesterday that after consulting its legal advisers, it had decided to appeal the tribunal’s decision once the penalty had been determined.

Dawn added that penalties in such cases were usually determined as a percentage of affected turnover and was usually that related to the market allocation arrangement in question.

The company said Dawn acquired the remaining 51 percent of Sangio in June 2014 and disclosed in its published financial statement that the latter’s turnover in that year was R363 million.

“The ultimate penalty will be judged across a number of variables and parameters that are in the judgment of the Competition Tribunal.

“Once the appeal proceedings have been finalised, Dawn will advise shareholders of the tribunal’s ruling in this regard,” it said.

The tribunal’s decision follows the Competition Commission alleging that Dawn, through its subsidiaries DPI Plastics and Ubuntu Plastics, and Sangio Pipes had entered into a market division agreement.

In terms of this agreement, DPI Plastics and Ubuntu Plastics allegedly agreed not to compete with Sangio Pipes in the high density polyethylene (HDPE) pipes market.

The alleged contravention of the Competition Act was discovered by the commission in 2014 when it was asked to approve a merger between Dawn and Sangio that would have resulted in Dawn acquiring the entire shareholding in Sangio.

Dawn had already acquired a 49 percent stake in Sangio but had failed to notify the commission about that transaction.

The undertaking not to compete was believed to have formed part of a shareholder agreement entered into in 2007 between Dawn and Sangio.

The commission referred the case to the tribunal in May 2015 for adjudication and it was heard by the tribunal last year.

Sipho Ngwema, a spokesperson for the commission, said the the commission welcomed the tribunal’s finding that a shareholders’ agreement between Dawn and Sangio had the effect of dividing the market for the manufacture of regular HDPE pipes in contravention of the Competition Act. Apparent In its decision, the tribunal said it was apparent that Dawn undertook not to manufacture HDPE piping for as long as it or its associates held shares in Sangio.

Dawn also undertook to procure all its HDPE piping from Sangio, it said.

During a tribunal hearing in July last year, David Unterhalter, counsel for the Dawn and Sangio, objected to the commission’s use as evidence of a competitiveness report compiled by the respondents for the merger proceedings at the commission.

Unterhalter said it was agreed at a pre-hearing of the case that the matter would be decided on the affidavits of the parties.

However, Tembeka Ngcukaitobi, counsel for the commission, said the competitiveness report was a central part of the commission’s case and the facts in the report must be common cause.

The tribunal panel hearing the case granted the commission’s application to admit the competitiveness report.