Engen, Shell fork out settlement
Wiseman Khuzwayo ENGEN Petroleum and Shell yesterday reached settlement agreements with the Competition Commission to pay millions in penalties for being part of a bitumen cartel with other oil companies, the commission said yesterday.
Engen agreed to pay R28.8 million and Shell R26.3m. The penalties are less than the maximum 10 percent of an offending firm’s revenue the commission can exact as a fine.
The two companies admit to having fixed the price of bitumen with other oil companies by collectively determining and agreeing on pricing principles, including a starting reference price and monthly price adjustments.
Bitumen, also known as asphalt or tar, is one of the by-products from the refining of crude oil. It and modified bitumen products are used to surface and rehabilitate roads, as waterproofing products and to suppress dust.
The end-users of bitumen are mainly government road agencies and municipalities.
The settlement agreements follow the referral of a complaint by the commission to the Competition Tribunal in March last year for adjudication against the Southern African Bitumen Association (Sabita) and seven oil firms. These are Chevron, Engen, Shell, Total, Masana Petroleum Solutions, Sasol and Tosas.
The commission said it did not seek a penalty from Sasol and its subsidiary, Tosas, which were granted conditional immunity, following the leniency application filed with the commission by Sasol in January 2009. Subsequent to the referral, the commission concluded settlement agreements with Masana in 2010 and Sabita in 2011, it added.
The case was initiated following information received from Sasol and Tosas in the leniency application.
The commission said its investigation found that the oil companies had entered into an agreement and engaged in collusive conduct from around 2000 until at least December 2009.
The conduct included the exchange of competitively sensitive information relating to the pricing of bitumen and associated products, and the use of an agreed pricing formula to set the wholesale list selling price of bitumen. This was facilitated through meetings convened by Sabita, as well as correspondence through Sabita and direct communication between the oil companies.
The settlement agreements have been filed with the tribunal and have been set down for confirmation as its orders.
On Tuesday, Business Report reported that serious shortages of bitumen and persistent supply problems had resulted in construction and engineering group Wilson Bayly Holmes-ovcon (WBHO) considering importing the product.
Louwtjie Nel, the chief executive of WBHO, said the shortages of bitumen were serious and the group operated on “a bit of a shoestring” every time there was a supply delay.
Feasibility studies on the import of bitumen should be completed next month.