The Competition Commission’s fast-track settlement project for the construction industry is set to come to an end this year, with more than 20 firms confessing to irregular conduct in more than 300 projects and tenders worth close to R30bn.
The objective of the project, launched in February 2011, was to convince firms in the sector to confess to involvement in bid-rigging relating to major infrastructure projects in SA, including the 2010 Soccer World Cup stadiums and the Gauteng Freeway Improvement Project.
In return, the commission offered lower penalties through negotiated settlements once the confession was made.
Despite the project’s relative success, the commission is still confirming some of the facts uncovered through leniency applications and the commission’s own investigations. According to the commission’s latest annual report, 175 applications for leniency were unsuccessful as they related to prescribed projects, or because other firms were first in line in asking for leniency from prosecution.
The commission’s head of advocacy and stakeholder relations, Trudi Makhaya, says they expected to reach settlements with most applicants. While there could still be areas of dispute, the process was designed for companies to disclose the projects and their involvement in bid-rigging — the incentive to do so is lower penalties.
"It has been a giant co-ordination exercise to get those involved in the same projects to agree, and to get settlements. The process has been a good way of clearing out a lot of cases. We would have been stuck at the Competition Tribunal for the next 10 years if we decided to take it case by case, or project by project," Ms Makhaya says.
"As government is moving forward with another massive infrastructure development drive, all of them (construction companies) are going to give undertakings as part of the settlement agreements that they will not engage in anticompetitive conduct going forward. That is quite reassuring."
However, Norton Rose director Heather Irvine is not as optimistic about the finalisation of the project this year.
"It is a bigger job than what the commission initially anticipated. It is a complex industry with different projects. Once the commission grants leniency to those first in line, the next step will be the conclusion of the settlement agreements."
Ms Irvine expects most companies will be keen to reach settlements with the commission rather than fighting it out before the tribunal.
Also high on the commission’s agenda this year is the private healthcare sector’s pricing structure. Ms Makhaya describes the industry as "challenging".
It does not seem to be capable of finding a pricing mechanism that sits comfortably with most. The inquiry will be similar to that of the banking inquiry that started in 2006.
Ms Makhaya admits that the consultation to determine the scope of the healthcare inquiry is taking a lot of time.
It has been a year since the announcement was made. The terms of reference — which will determine the scope of the inquiry — have to be "intellectually defensible, fair and rational", Ms Makhaya says.
" We have to invest up front to get it right, and to ensure that all the mechanisms are in place. We have to look at all the risks. It does not help anyone if we do an inquiry that lasts two years and we miss some fundamentals."
A little patience is required, she says.
The commission is also about to review strategically the priority industries that will be its focus over the next five years.
According to Ms Irvine, the trend for harsher penalties is set to continue this year.
Last year, companies paid administrative fines of R934m for violating the Competition Act. The vast majority of the them were paid by firms that engaged in price-fixing, market allocation and collusive tendering in a cartel.
Ms Irvine also foresees closer co-operation with other African competition authorities — particularly in industries that affect poor consumers such as agriculture, food retail, construction and chemicals.
The South African authorities are seen as having a lot of experience in these sectors.
More in this section
- BSI earnings plummet as operating costs increase
- Construction sector rebound expected to take years
- New body from cement industry cast-offs
- Invicta boosts profit, but hoards cash for rainy day
- Standard banks on rewards programme to stay in pole position
- Barloworld expects infrastructure spending to boost sales