Tribunal fines fire control companies millions for cartel conduct

Pretoria, Gauteng, SA (January 29, 2021) - The Competition Tribunal has found two fire control firms guilty of fixing prices, dividing markets and tendering collusively in the market for supplying, installing and maintaining fire control and protection systems.

Cross Fire Management (Pty) Ltd has been ordered to pay an administrative penalty of R12 894 000  and Belfa Fire (Pty) Ltd has been ordered to pay R10 100 126.

Though they admitted to certain instances of collusion, both Belfa and Cross raised a prescription argument and contended that other instances occurred at a time when the Competition Act was not yet in force and, therefore, found no application. In a third category of collusive instances, both firms denied that they had colluded on the tenders and both also denied participation in an agreement to divide markets by allocating customers. Cross also raised the defence that it had exited the cartel in early 2009, around the time of the One Monte Tender.

In its order and reasons, the Tribunal states: “Both Cross and Belfa admit that they engaged in collusive tendering/cover pricing prior to the promulgation of the Act in 1999. While we accept that we would not enjoy jurisdiction over conduct in that period, the fact that it occurred is something we can have regard to in the process of characterising it. That the cover pricing arrangements or understanding persisted over so many years suggest that this was an overall arrangement or understanding amongst the firms which simply continued after the promulgation of the Act…

… There is no other reasonable explanation for why the relevant firms would continue with this conduct with such relative ease over so many years unless there was a general agreement, understanding or arrangement amongst them that they could engage in cover pricing and collude from time to time….

  … Thus, we conclude that the nature of the conduct in this matter was not once-off ad hoc instances of cover pricing or collusion on tenders but a long-standing overall arrangement, understanding or agreement amongst the respondents involving collusive bidding, cover pricing and customer allocation…

  The Tribunal rejected Cross’ defence that it exited the cartel in 2009 and has concluded that Cross was a party to the longstanding practice of cover pricing and collusive arrangements and continued to be so until, at least, the Commission’s initiation of the investigation and its referral of the matter to the Tribunal for prosecution.

In regard to Belfa, the Tribunal has also concluded that the firm contravened the Competition Act in that it was party to an understanding, arrangement or agreement to directly or indirectly fix prices, divide markets and tender collusively for the supply, installation and maintenance of fire control and protection systems.

 

The case has been dismissed against another fire control firm, Tshwane Sprinklers cc, due to insufficient evidence. Tshwane denied its involvement in the cartel and the Tribunal found that the Commission had failed to prove its case against the firm.

 

The Tribunal’s order brings this cartel case to its conclusion. It emanated from a complaint referral brought by the Competition Commission in 2017 against 7 firms that supply, install and maintain fire control and protection systems.

The respondents in this matter were: Afrion Property Services cc; Belfa Fire (Pty) Ltd; Cross Fire Management (Pty) Ltd; Fire Protection Systems (Pty) Ltd; Fireco (Pty) Ltd; Fireco Gauteng (Pty) Ltd, now known as KRS Fire (Pty) Ltd, and Tshwane Sprinklers cc.

By the time the Tribunal hearing had commenced, 4 of the respondents (Afrion, FPS, Fireco and Fireco Gauteng) had reached settlements with the Commission. The Tribunal’s order, therefore, deals with the remaining 3 respondents, being: Belfa, Cross and Tshwane.