SCI witness ‘drawing an artificial barrier’ over pricing

THE Competition Commission’s counsel Arnold Subel SC yesterday described arguments from Sasol Chemical Industries’ (SCI) first witness, Jorge Padilla, as “drawing an artificial barrier”.

Mr Padilla had questioned the commission’s methods in arriving at an economic value and referred to the Competition Appeal Court’s judgment in the ArcelorMittal case where economic value referred to the notional price of the good or service under assumed conditions of long-run competitive equilibrium. Yesterday, Mr Padilla compared SCI’s prices for propylene and polypropylene to a wide range of domestic prices in other regions using data provided.

Results of this showed differences in the range of -4% to 1.3% for propylene and in the range of -5.3% to 18% for polypropylene, he said. Mr Padilla also did a robustness test using data provided by other pricing discovery agencies, which showed an overall range between - 5.3% and 12.5%. In his view, these results are inconsistent with a finding of excessive pricing.

Mr Padilla concluded that based on broad range of comparisons of domestic prices, using available price series from four market information providers, SCI’s prices are in line with international prices.

However, this is inconsistent with the commission’s allegations levelled against SCI.

Mr Padilla said the commission’s key test for excessive pricing was comparing SCI’s prices with its export profits from China.

Mr Padilla said the commission’s test was flawed for various reasons which, according him, included the false reliance by the commission on the interpretation of the Competition Appeals Court in the ArcelorMittal case.

He said domestic prices were higher than export prices in many regions. Both the propylene and polypropylene primary comparators failed to cover costs, he said.

On Tuesday, Wim Trengove SC, appearing for SCI, referred to the Competition Appeal Court judgment in the ArcelorMittal case.

The case had dealt with excessive pricing and provided guidelines for the tribunal in determining if a dominant company contravened the Competition Act by charging excessive prices. The Competition Appeal Court had found that it would be necessary to determine an economic value.

That must represent an amount of money which, notionally, would be the price or value of the goods or service in “assumed conditions of long-run competitive equilibrium”.

Mr Trengove referred to the appeal court, which said the cost savings to a company resulting from “any other special advantage, current or historical” that reduced its costs below the notional competitive norm, ought to be disregarded.