Johannesburg - Sasol was slapped with a hefty R534 million fine by the Competition Tribunal yesterday for charging local customers high prices for key chemical ingredients, a move hailed by the government and industry players as a significant step in preventing anti-competitive behaviour in business.
While the fine will put a small dent in Sasol’s pockets, experts said that legal options were available to consumers of the chemical products to institute civil proceedings to recover any loss and/or damages due to the price fixing.
The tribunal found that between 2004 and 2007 Sasol Chemical Industries charged Safripol excessive prices for purified propylene and polypropylene. During the period it charged Safripol two different prices: a higher tier 2 price and a lower tier 1 price.
Propylene is a thermoplastic polymer used in a variety of applications including packaging, labelling, textiles, stationery, plastic parts and different types of reusable containers.
In respect of purified propylene, the tribunal imposed a penalty of R205.2m. On polypropylene, it imposed a R328.8m penalty.
The tribunal ordered Sasol to revise future pricing of polypropylene and propylene to drive down prices.
The hearing ran from May 13, 2013 and May 9, 2014.
When the tribunal applied a price-cost test, it found that Sasol’s mark-ups on purified propylene prices over actual costs during the complaint period were in the range of 39.9 percent to 41.5 percent for tier 2 sales to Safripol, and in the range of 25.1 percent to 26.5 percent for tier 1 sales to Safripol.
“For polypropylene, the tribunal found Sasol’s mark-up of its polypropylene price over actual costs (including an appropriate return on capital) during the complaint period was in the range of 26.9 percent to 36.5 percent,” tribunal registrar Lerato Motaung said.
Economic Development Minister Ebrahim Patel welcomed the ruling and said it was thoughtful and well-reasoned given that Sasol’s dominance was initially achieved through significant state support.
“Excessive pricing of polypropylene raises the cost of South African manufacturers and weakens our efforts to deepen industrialisation, improve industrial competitiveness and create more jobs.
“The decision is a firm step to combat abuse of market dominance by producers.”
Leana Engelbrecht, a senior associate in competition practice at law firm Cliffe Dekker Hofmeyr, said Sasol had contravened section 8 (a) of the Competition Act, in a way that led to consumer harm and was to the detriment of its customers and inhibited its customers’ ability to compete.
“It is conceivable that consumers may have suffered loss or damage as a result of this conduct. The option is available to the consumers of these products to institute civil proceedings to recover any loss or damages they suffered, provided that such loss or damage can be proven and quantified.”
Ian Kennon, the public affairs director of Safripol, said the company was pleased with the announcement..
Alex Anderson, the media manager of Sasol, said the firm was reviewing the decision and considering its options.
Its shares gained 0.3 percent to R609.84 yesterday.