Johannesburg - A Competition Commission investigation into price fixing that involved listed Steinhoff International and implicated other firms, including Loungefoam, Feltex and Kap Industrial Holdings has resulted in a settlement agreement for the non-notification of a merger.
In terms of the settlement agreement between the commission and Steinhoff, Kap Raw Materials, Loungefoam, Kap Industrial and Feltex, the companies jointly and severally agreed to pay a R1.75 million fine for failure to notify the commission of a merger prior to its implementation.
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A hearing of the Competition Tribunal yesterday heard details of the case but has not yet confirmed the agreement.
Hamilton Maenetje, appearing for the commission, told the tribunal the penalty was negotiated between the parties and was not based on any consideration of the annual turnovers of the companies involved.
The settlement agreement follows the commission in September 2007 initiating a complaint against the parties for contraventions of the Competition Act. The commission investigated the complaint and referred it to the tribunal in September 2008.
It alleged Loungefoam and Vitafoam agreed to fix the selling price of the foam they produced and the benchmark price they used to negotiate the purchase price of the chemicals used producing foam was in contravention of the act.
Customers
The commission further alleged that Loungefoam and Vitafoam agreed to divide the market by allocating customers during meetings of the Foam Forum and Loungefoam, Vitafoam and Feltex allocated customers through a reciprocal restraint agreement in contravention of the act.
After high court litigation over five years, the commission and the respondents entered into settlement discussions and agreed to settle the matter.
Maenetje said it appeared to the commission that Vitafoam, although not part of the written restraint agreement between Loungefoam and Feltex following the sale by Feltex of its furniture and bedding foam business to Loungefoam, conducted itself as if it were party to the restraint agreement.
Since the commission now accepted Vitafoam and Loungefoam were part of the same economic entity in terms of the merger, he said.
MA Wesley, a counsel for the respondents, said the high court application to dismiss the complaint was based on the constitutional rights of the respondents to prosecution without undue delay.
Wesley said apart from the five-year period when there was litigation, the commission for two years did not take a step to prosecute the matter. He said that extraordinary delay was completely unexplained.
Maenetje said the commission had come to accept that Steinhoff believed a merger in 1999 had given it control of both Loungefoam and Vitafoam. He said Steinhoff gained sole control of Loungefoam in September 2003 through the acquisition of 47.5 percent in the company and integrated the business.
Maenetje said this resulted in the commission serving a notice that the conduct of Vitafoam and Loungefoam was regulated by Steinhoff and was a merger and should have been notified to the commission.
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