South Africa targets construction collusion

South Africa's Competition Commission has launched an investigation into the collusion in the country's construction industry following several applications for corporate leniency. It says these admissions of guilt point to practices such as price fixing, allocation of work and submitting uncompetitive bids (cover pricing).

A statement from the Commission said, "The Commission's preliminary investigations on the projects covered in the CLP (leniency) applications indicate that there may be widespread collusion in the construction industry."

The Commission also said it was looking into the practice of contractors forming joint ventures for certain projects. "In so far as they bring competitors together, these joint ventures may be used as a platform to engage in collusive practices. Some of the joint ventures have permanent statues and continue to be used by competitors in the industry as a platform for sharing sensitive competitive information," it said.

It has published a list of 19 South African and overseas contractors that it is investigating. They are Grinaker, Stefanutti, Group Five, WBHO, Concor, Liviero, Giuricich, Hochtief, Dura, Nishimatsu, Esorfranki, VNA Pilings, Rodio, Diabor, Gauteng Piling, Fairbrother, Geomechanics, Murray & Roberts and Aveng.

The Commission said collusion in the industry could have inflated prices for infrastructure and delayed delivery of projects. It also cited examples of construction industry collusion in other parts of the world to imply that such practices were common.

Deputy Commissioner Tembinkosi Bonakele said, "International experience has shown that collusive practices of this nature are also prevalent in the construction industry in other countries. Examples include the Netherlands and the UK where a large number of construction firms took advantage of the corporate leniency policy to forward and to clean up their act once investigations were launched."

Murray & Roberts reacted defiantly to the Competition Commission's assertions. A statement said, "Murray & Roberts categorically denies these allegations and statements of widespread and prevalent collusion and has lodged a formal objection with the Director General of the Department of Trade and Industry in this mater."

However, it did concede that in the past it has seen isolated instances of individual employees colluding with competitors. However, it said these examples were cases of fraud where individuals acted for personal gain, and when Competition law was found to have been breached it had applied to the Competition Commission for leniency.