Johannesburg - A Competition Commission investigation has implicated nine international shipping companies in the prohibited practices of price fixing, market division and collusive tendering for the transportation of vehicles, equipment and machinery by sea to and from South Africa.
Those implicated include three Japan-based companies in Mitsui OSK Lines, Nippon Yusen Kabushiki Kaisha (NYK) and Kawasaki Kisen Kaisha (K-Line), Chilean-based Compañía Sudamericana de Vapores, Norwegian-based Höegh Autoliners and Wallenius Wilhelmsen Logistics (WWL), as well as Korean-based Eukor Car Carriers.
It is alleged these companies agreed to fix prices, divide markets and collude on tenders issued by a number of companies, including Toyota Motor Corporation (TMC) and Toyota South Africa Motors (TSAM); Volkswagen and Volkswagen South Africa; Nissan Motor Corporation through its Renault-Nissan Purchasing Organisation; Daihatsu Motor; Honda Motor Company; BMW South Africa; Auto Alliance (Thailand); Volvo Construction Equipment; Ford Motor Company of Southern Africa; General Motors; and Mitsubishi Motor Corporation.
Two cases
Inflated shipping costs would contribute to increased vehicle prices in South Africa and also dent the country’s export competitiveness.
The Competition Tribunal this week heard two cases involving consent settlement agreements between the commission and WWL and NYK.
In terms of these agreements, which have not yet been confirmed by the tribunal, WWL admitted to 11 instances of engaging in prohibited practices and agreed to pay a fine of R95.69 million. NYK also admitted to engaging in prohibited practices on 14 occasions and to pay a fine of R103.97m.
Anthony Ndzabandzaba, who was part of the commission’s investigation team, told the tribunal on Wednesday that there were a number of respondents to this investigation.
This had not been easy for the commission for a number of reasons, including the fact that these were big entities and most of them did not reside in South Africa.
Settlements
“The commission is still proceeding with its investigations in respect of some of the firms that have not shown any willingness to settle. There is a leniency applicant but I have not yet procured a [confidentiality] waiver from the leniency applicant,” he said.
Ndzabandzaba said the number of instances of collusion against the respondents meant the commission had to devise a settlement mechanism that it would then apply across all the respondents in the interests of fairness and in a bid to achieve equitability of some sort.
He said the six-step approach in the commission’s guidelines for the determination of administrative penalties for prohibited practices would have resulted in “very, very high penalties”, especially considering the collusion had not in all instances resulted in the respondents being successful in winning the tender.
Ndzabandzaba said the commission had decided to cap the level of the penalty in respect of each instance of collusion where a company was successful in winning the tender at 3.5 percent of that firm’s annual turnover. It would apply a much lower percentage penalty in instances where the firm was unsuccessful in being awarded the tender.
He said the commission had done this in a bid to expedite the conclusion of this investigation, which had already drained a lot of the commission’s resources and had resulted in the consent agreements that had now been concluded.
The maximum penalty that may be imposed in terms of the Competition Act is 10 percent of annual turnover.
Ndzabandzaba confirmed that the total penalty agreed in terms of the consent agreement with WWL and NYK exceeded 10 percent of their annual turnover for the 2012 financial year.
However, he said this was not a concern because the penalty related to three different contraventions of the Competition Act: price fixing, market allocation and collusive tendering. It was a cumulative penalty related to 11 instances of collusion by WWL and 14 by NYK.
Fast Facts
Some of the prohibited practices admissions by NYK and WWL:
In 2007, Toyota issued a request for a quotation for the shipment of Toyota Corolla and Toyota Hilux vehicles from South Africa to Europe. NYK and Mitsui OSK Lines (MOL), Kawasaki Kisen Kaisha (K-Line) and Wallenius Wilhelmsen Logistics (WWL) agreed that MOL would take 50% of the business and NYK, K-Line and WWL would share the remaining 50% equally.
The carriers tendered in such a way that the tender was awarded in line with this agreement.
In September 2008, NYK, MOL, K-Line and WWL met and discussed how they were to respond to a price decrease request from Toyota. The carriers agreed instead to seek a price increase in 2009. However, the global recession in 2009 resulted in the agreement not being implemented.
In 2010, Toyota issued a request for quotation for the shipment of Toyota vehicles from South Africa to Europe and North Africa. In December 2010, NYK, MOL, K-Line and WWL met and agreed to achieve a set rate. Toyota awarded the two-year contract to NYK, WWL, MOL and K-Line.
In 2008, Volkswagen issued a request for quotation for the shipment of Volkswagen vehicles from South Africa to Europe and vice versa. WWL contacted MOL, NYK and K-Line and requested them not to offer lower rates than that offered by WWL. MOL and WWL also agreed that if WWL was awarded the contract, it would sublet 50% of the cargo to MOL and WWL, NYK and K-Line would share the remaining 50% equally. The tender was eventually awarded and shared as agreed between the carriers.
In September 2008, WWL and MOL met and agreed that MOL would respect WWL’s right to ship Volkswagen’s vehicles from Europe to South Africa. In line with this agreement, WWL was able to successfully tender for the shipment of Volkswagen’s vehicles from Europe to South Africa without any competition and WWL was able to secure 100% of the shipment.
Source: Competition Commission
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