Esorfranki companies ordered to pay R15.7m for colluding to fix prices

The Competition Tribunal has ordered three Esorfranki companies to pay an administrative penalty of R15.7m after finding they colluded with competitors in construction projects to fix prices and allocate customers and that they engaged in bid rigging.

The tribunal made this decision in the long-running case involving construction and engineering companies Esor Ltd, Esor Africa (Pty) Ltd and Esor Construction.

The case against another accused firm in the matter, Diabor (Pty) Ltd, was dismissed by the tribunal.    

The matter relates to construction projects in the markets for geotechnical services including piling, lateral support, grouting and geotechnical drilling investigation services.

The Competition Commission alleged that from the 1970s to at least 2015, a number of companies colluded on various tenders. It said the companies colluded through “formal arrangements” until 2005 after which they engaged in “ad hoc arrangements”.

In its pleadings, Esorfranki admitted to participating in the formal arrangements but said it stopped in 2005, more than three years before the commission's investigation started in 2009.

It argued that the commission, therefore, could not bring the case against it in terms of the Competition Act, which — before the 2018 amendments — provided that a complaint in respect of a prohibited practice may not be initiated more than three years after the practice has ceased.  

However, the tribunal dismissed Esorfranki’s argument. It said “the conduct pertaining to the projects allocated before September 24 2005 continued at least until after June 2008”. On that basis alone, the claim by Esorfranki that the commission's 2009 initiation was not valid “fell to be dismissed”.  

Regarding ad hoc arrangements, Esorfranki admitted to participation in collusive conduct in respect of one Sappi/Saiccor project.

After considering the totality of the evidence, the tribunal found that the Esorfranki group companies contravened the Competition Act by colluding with their competitors to fix prices, allocate customers and engage in bid rigging through cover pricing from at least 1999 to 2008.

In the case of Diabor, the commission had alleged the company was involved in at least three ad hoc arrangements.

Diabor denied participating in the collusive conduct and said the commission’s case against it should be dismissed.

After considering all the evidence, the tribunal said it was dealing with hearsay evidence. It said the commission's chief and only witness conceded that all his evidence regarding Diabor's involvement in the collusion was based either on what he was told by others or what he had assumed.

The tribunal found that the commission had not, on a balance of probabilities, discharged its onus to show that Diabor was involved in any collusive arrangements.

“Accordingly, the complaint referral against Diabor is dismissed.”

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