R2.99m price-fixing fine for scrap metal dealer

SCRAP metal dealer, Ben Jacobs Iron and Steel, has been fined R2.99 million after admitting to contravening the Competition Act by agreeing with its competitors to fix purchasing prices of certain ferrous scrap metals and to allocate suppliers among the large scrap metal merchants.

The penalty, which was confirmed by the Competition Tribunal yesterday following a hearing, amounts to 5 percent of Ben Jacobs Iron and Steel’s total annual turnover related to ferrous scrap metal in its financial year to June 2006.

Settlement The hearing is the last in a series of settlement agreements reached between the Competition Commission and companies in the ferrous and non-ferrous scrap metal markets that had admitted to engaging in price-fixing, dividing up the market and collusive tendering.

Seven other companies have to date paid fines amounting to a total of R225m related to these contraventions of the Competition Act.

The settlement followed an investigation initiated by the Competition Commission in August 2006 that emanated from a large merger filing to the commission in 2005 related to the proposed acquisition by the New Reclamation Group of SA Metal Group and its associated company, Waste Control.

Jabu Ngobeni, appearing for the commission, said it appeared from information requested from the parties that there was cartel activity in both the ferrous and non-ferrous scrap metal markets.

Ngobeni said the proposed acquisition was prohibited by the commission and it thereafter initiated a complaint against the New Reclamation Group, SA Metals, National Scrap Metal and Cape Town Iron and Steel.

Ngobeni said the commission took a decision on percentage penalty to be imposed.

He said the commission received further information pointing towards collusive tendering as a result of that investigation and had expanded that complaint to other parties.

Ngobeni said the commission also conducted dawn raids on the premises of New Reclamation Group all over South Africa and information from these raids resulted in the initiation of another complaint.

He said Ben Jacobs Iron and Steel was only implicated in price-fixing and market allocation with the New Reclamation Group, Universal Recycling and Ton Scrap.

Ngobeni said the commission took a decision when the New Reclamation Group settled that it should pay 6 percent of its annual turnover and all the other parties involved would be given a discount on that.

He said all of the subsequent settlements with other implicated companies were at 5 percent of their turnover.

Ngobeni said the commission took a decision on the percentage penalty to be imposed after looking at the history of how the conduct arose, although this could not be used as a justification for the conduct.

Security of supply He said it was very clear and part of public record that at that stage government itself through the Trade and Industry Department had requested the parties to meet because there was an issue around security of supply in South Africa, because companies were exporting scrap and not satisfying local customers first.

“When the commission brought it to the attention of government at the time that those discussions were in contravention of the Competition Act, government agreed and it stopped and discouraged the parties from engaging in these discussions.

“At the time it was done, the parties had already implemented some of these arrangements,” he said.