Bicycle cartel brought to task by competition commission

Cycling enthusiasts can ride a bit easier - and more affordably - as more of those involved in a nation-wide cycling cartel are brought to book.

Four of the 20 bicycle retailers and wholesalers implicated in the price-fixing scandal appeared before the Competition Tribunal on Wednesday, with the hope that the Tribunal will approve the terms of a settlement agreement they have reached with the Commission.

Melody Street 18, Pedal-On Marketing, trading as Maverick Cycles, Albatros Fishing and Cycling and Maillot Jaune Trading have admitted to colluding with others in 2008 to set the wholesale and retail prices of bicycles and cycling equipment. They have agreed to cooperate in the prosecution of others involved in the cartel.

Thirteen other companies, including Dunkeld Cycles in Johannesburg, Bowman Cycles in Cape Town and Bester Cycles in Pretoria, have entered into similar settlement agreements.

In a meeting, the companies agreed to all increase their mark-up on bicycles to 50% from 35% and the mark-up on cycling accessories to 75% from 50%.

The companies also agreed to get rid of discounting and ask wholesalers to advertise higher recommended retail prices to the public.

An anonymous source leaked the minutes of the meeting to the Commission, prompting the investigation.

Despite proof of this far-reaching cartel, industry insiders [the newspaper] spoke to pleaded ignorance to the existence of price-fixing in the sport.

Chairwoman of Soweto's Southsky Cycling Club Busisiwe Msimango said while prices of bicycles and accessories were steep, there were no indications of price-fixing.

“Prices differ and when you shop around you get a good price elsewhere," said Msimango.

Scott McKenzie, chairman of Sandton club Complete Cyclist, said: “We do not get a lot of cases [of price-fixing]. Cyclists have options to shop around [for] competitive prices.”

Bryanston-based Absolute Cycling Club chairman David Lange said no members of the club have complained about retailers suspected of collusion or fixing prices.

The Competition Tribunal late yesterday approved the terms of the settlement agreement, which will see the four businesses stop fixing prices, send all employees for training in competition law and display prominent notices at their premises detailing the disciplinary action handed down to them for engaging in uncompetitive practice.

But what raised the Tribunal's brows was that there was no undertaking to pay fines.

The Commission regularly imposes fines as punishment when companies admit wrongdoing and choose to settle. It can impose a fine to the maximum of 10% of the business's turnover in the previous year.

In 2010 the Tribunal fined Pioneer Foods R195-million for its involvement in the bread cartel. In the same year it imposed the maximum penalty for the first time when it fined Southern Pipeline Contractors almost R17-million for its role in the concrete pipes cartel.

The Commission on Wednesday told the Tribunal that the agreement's terms were sufficient to deter the companies from colluding in the future.

Senior legal counsel for the Commission Ngoako Moropene said the companies were small and imposing a fine might cripple them, which is not the Commision's goal.

Central Gauteng Cycling chairman Shahad Khan said he was not aware of the cartel and could not comment on it specifically, but he would be interested to know how the Commission had decided that the companies involved were small.

Next month, the Commission will prosecute two wholesalers - Coolheat Cycle Agencies and Omnico - that have opted not to settle. These are the final members of the cartel that still need to be brought to book.

The Commission withdrew its case Fritz Pienaar Cycles in Pretoria because the business was liquidated. No further action will be taken against former owner Fritz Pienaar, who may testify against Coolheat and Omnico.