South African contractors settle collusion case

A group of 15 contractors active in South Africa have agreed to pay fines totalling ZAR 1.46 billion (US$ 145 million) for anti-competitive behaviour. The fines were agreed with South Africa’s Competition Commission under its Construction Fast Track Settlement Process, which was launched in February 2011.

The 15 contractors named in the settlement were, Aveng, Basil Read, Esorfranki, G Liviero, Giuricich, Haw & Inglis, Hochtief, Murray & Roberts, Norvo, Raubex, Rumdel, Stefanutti, Tubular, Vlaming and WBHO. Fines ranged from ZAR 155,850 (US$ 15,400) for Esorfranki to more than ZAR 300 million (US$ 30 million) for Aveng, Murray & Roberts, Stefanutti and WBHO.

The commission said it found more than 300 cases of bid-rigging on projects concluded after 2006. Schemes finished before this cut-off are beyond the prosecutional reach of South Africa’s Competition Act. It added that anti-competitive behaviour among contractors included holding meetings to divide markets and agree margins, the submission of artificially high tenders to favour competitors (cover pricing) as part of market sharing agreements and the payment of a ‘losers fee’ by the winner of a contract to cover others’ bidding costs.

Competition commissioner Shan Ramburuth said, “In revealing the extent of collusion in the construction industry, the Commission’s fast track settlement broke up existing cartels and created awareness of collusive practices in the industry. Embedding a competitive culture will be critical to bringing down the costs of future infrastructure investments and will incentivise firms towards innovation and efficiency in future projects.

Henry Laas, CEO of Murray & Roberts said, “After an exhaustive process, we have finally reached settlement with the Commission. The investigation and its subsequent burden on our reputation have weighed heavily on our employees and stakeholders. To the best of our knowledge, there is no anti-competitive conduct present within the group and the Board and management continue to set the vision for and commitment to a morally and ethically sound culture within Murray & Roberts.”