Tribunal finally set to nail wire price-fixing case

03 May 2015 - 02:00 By CHANTELLE BENJAMIN
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File photo.
File photo.
Image: Gallo Images/Thinkstock

Six years after a case involving a price-fixing cartel in the wire manufacturing sector was first submitted to the Competition Tribunal, the hearing is finally set to go ahead.

This follows the Competition Appeal Court's decision in March to deny a request by some of the companies involved to delay the hearing again. The case is now set down for July 1.

Nathan Friedman, the chairman of Cape Gate, a respondent in the case, said he was relieved the matter would finally be heard. "We just want to put this to bed now. It's been going on for years. We have agreed to cooperate with the [Competition] commission. The sooner it's dealt with, the better."

Wire and wire products manufacturers, many of them well-known industry players, stand accused of fixing prices of wire products, colluding on tenders and dividing markets by allocating customers among themselves between 2001 and 2008.

Companies affected included Harmony Gold and farmers' co-operatives.

Some of the respondents formed a group of companies called the Allens Meshco Group (AMG), which allegedly entered into agreements among themselves to fix the prices of nails and other products.

Businessman Rick Allens, who owns or has significant shareholdings in companies in the AMG group, denied in a written reply to Business Times that he or AMG were part of a cartel that included Cape Gate and Consolidated Wire Industries (CWI) between 2001 and 2008. Gape Gate and CWI were major players in the industry.

"In fact, AMG competed with CWI and Cape Gate and grew its market share over this period," Allens said.

The companies in the AMG group are Allens Meshco, Hendok, Wireforce, Agri Wires, Agri Wires North, Agri Wires Upington, Cape Wire, Forest Wire, Independent Galvanising and Associated Wire Industries.

However, statements submitted by CWI and Cape Gate place Allens at an initial meeting in August 2001, where the alleged cartel discussed how to stop the price wars that were crippling the sector.

CWI chief executive Johannes Botha said: "During the period 2001 to 2008, CWI, Cape Gate and AMG had an arrangement or understanding directly or indirectly to fix the price of wire and various wire products. This included agreeing on a national price list for wire and wire products . (and) agreeing on the level of discounts."

Allens said CWI and Cape Gate had instigated and overseen the market division and collusion to help local steel producers to control the market.

Allens said this was why AMG had asked the Pretoria High Court in May 2010 to overturn a decision by the commission to grant leniency to CWI.

"CWI is jointly controlled by the major upstream players ArcelorMittal South Africa (formerly Iscor) and Scaw Metals," Allens said. "These upstream players have a history of abusive and dominant behaviour and have controlled the national steel industry for decades.

"CWI ... has been used to implement their manipulative and abusive strategies. It would appear that the industry bully is being given a free pass by the commission, he said."

Freddie de Kok, a director of Hendok, an AMG company, will testify at the tribunal how his firm was allegedly "squeezed by upstream steel mills and their vertically integrated downstream operations, eventually losing significant share to these companies, particularly Cape Gate".

Ironically, a first complaint lodged with the commission with regards to collusion in the wire sector in 2003 makes allegations that AMG co-operated with Iscor.

Barnes Fencing Industries, F&G Quality Tubes and Dunrose, all consumers of a steel wire product called "low carbon wire rod", accused Allens Mescho, Wireforce Steelbar, Hendok, Independent Galvanising and Associated Wire Industries of conspiring with Iscor to allocate geographic areas for the distribution of nails and galvanised wire.

A second complaint, lodged by CWI in 2008, also named AMG as one of the companies involved in cartel behaviour.

The commission has requested that the tribunal fine the respondents a maximum 10% of their yearly turnover if found to have contravened the Competition Act.

Allens said accusations that he had been delaying the hearing with legal action were unfair. He said any delays were the fault of the commission, which failed to act timeously to file its opposing papers. He said he had been prepared to go ahead with the hearing, first scheduled for last month.

The Competition Appeal Court criticised AMG and the tribunal for allowing the case to drag on for so many years.

"More than five-and-a-half years after the referral, the hearing on the matter has not begun in the tribunal.

"Cartel cases are difficult enough without adding failing memory to the challenges," the appeal court said.

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