Johannesburg - In a highly usual move, the country’s competition watchdog has decided against fining 17 local bicycle retailers and wholesalers for price fixing.
Melody Street 18, Pedal-On-Marketing CC trading as Maverick Cycles, Albatros Fishing and Cycling, previously named Winners Cycles, and Mailot Jaune Trading, agreed to being directly or indirectly engaged in concerted practices to fix prices or other trading conditions, had their consent settlement agreements with the Competition Commission confirmed by the tribunal.
None of these agreements included the imposition of any administrative penalty.
Paul Coetser, the head of competition law at Werksmans Attorneys, said it was unusual but not unprecedented for an administrative penalty not to be imposed.
He said this would only be considered when the commission did not have a particularly strong case or when the benefits of prosecuting a case did not outweigh the costs.
The latest agreements follow a commission investigation after it had received an anonymous tip-off regarding a meeting that allegedly took place in Cape Town and Gauteng between various cycling retailers and wholesalers.
The commission was also provided with the minutes of the meeting, which indicated that discussions had taken place about hiking gross margins by increasing mark-ups for cycling accessories from 50 percent to 75 percent and for bicycles from 35 percent to 50 percent.
GLOBAL PHENOMENON
Mike Bradley, the general manager of Cycling South Africa, said it was aware of the cases and believed there was a risk that these practices could hamper the development of the sport. But he said the pricing of bikes in South Africa was determined by manufacturers overseas, which was a global phenomenon and the reason online stores were so popular.
The firms had also discussed: the proposed implementation date of the price increase; getting rid of discounting and of shops undercutting each other; and getting wholesalers to provide higher recommended retail prices to retailers and advertising these prices to the public. This led to the commission charging 20 firms for contravening the Competition Act, of which 17 have now had their settlement agreements confirmed.
Ngoako Moropene, a legal counsel at the commission, said in settling these cases without the payment of an administrative penalty, the commission had taken into account that it had settled cases with other firms without imposing a fine.
The commission had also taken into account the views of the tribunal in a meeting prior to the commencement of a hearing into an exception application by some of the implicated firms. These views included that the continued prosecution of 20 respondents was a waste of public funds, especially given that they were all small businesses.
Moropene said the commission believed the terms of the settlement agreements reached were appropriate to deter the firms from engaging in anti-competitive conduct in future.
An administrative penalty could drive the firms out of business or to downsize, resulting in job losses.
He said the complaint against Fritz Pienaar Cycles had been withdrawn because the firm had been liquidated. But Pienaar had agreed to conclude a settlement agreement in his personal capacity.
Moropene said each of the firms had, among other things, agreed to fully co-operate with the commission in relation to the prosecution of the remaining respondents, to desist from engaging in the conduct complained of and refrain from participating in meetings aimed at engaging in cartel conduct.
In addition, they had agreed that employees, management, directors and agents would attend a competition law compliance programme. Each firm also has to display a settlement notice in a prominent place on its premises for six months.