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Esor fined for collusion and bid rigging on contracts

THE COMPETITION matter relates to construction projects in the markets for geotechnical services including piling, lateral support, grouting and drilling investigation services.

THE COMPETITION matter relates to construction projects in the markets for geotechnical services including piling, lateral support, grouting and drilling investigation services.

Published May 9, 2022

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THE COMPETITION Tribunal on Friday imposed a R15.7 million penalty on construction and engineering firm Esorfranki for colluding with competitors to fix prices and allocate customers, and engage in bid rigging through cover pricing.

In a cartel case involving construction and engineering companies, the Tribunal ordered Esor Limited, Esor Africa and Esor Construction, referred collectively as Esorfranki, to jointly pay the administrative penalty, while the case against another accused firm Diabor was dismissed by the Tribunal.

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Esor delisted from the JSE in June 2020 after subsidiary Esor Construction went into business rescue in August 2018 after suffering losses on a number of contracts, and due to a lack of new work from a decline in state spending on infrastructure.

The competition matter relates to construction projects in the markets for geotechnical services including piling, lateral support, grouting and drilling investigation services.

The Competition Commission alleged that from the 1970s to at least 2015, eight respondents colluded on various tenders. The Commission alleged the companies colluded through “formal arrangements” until 2005, after which they engaged in “ad hoc arrangements”.

In its pleadings Esorfranki admitted to participating in the formal arrangements, but said it stopped in 2005, more than three years before the Commission's investigation started in 2009.

It argued the Commission, could not bring the case against it in terms of the Competition Act which, before the 2018 amendment provided: “A complaint in respect of a prohibited practice may not be initiated more than three years after the practice has ceased”.

However, the Tribunal said in a statement on Friday it had dismissed Esorfranki’s argument on the following basis: “… the conduct pertaining to the projects allocated prior to 24 September, 2005 continued at least until after June 2008. On this basis, the claim by Esorfranki that the Commission's 2009 initiation was not valid because the conduct had ceased in 2005, falls to be dismissed.”

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Regarding the ad hoc arrangements, Esorfranki admitted to participating in collusive conduct in one Sappi/Saiccor project.

The Commission had accused Esorfranki of involvement in several ad hoc arrangements. However, the Tribunal noted that the case against Esorfranki revolved on the degree of its culpability and not whether it was culpable at all.

“The Tribunal says the ad hoc collusion was part and parcel of the overall agreement and not something new that started after 2005,” the statement said.

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“It might have withdrawn from the formal arrangements, but its collusive conduct that was the subject of the overall agreement under the formal arrangements continued at least until June 2008.

Its conduct after 2005 could be characterised as a continuation of the overall agreement albeit in a different form.

But even if the ad hoc arrangements are not characterised as such, we find Esorfranki's collusive conduct in the Sappi/Saiccor project had not ceased three years prior to the Commission's initiation in April 2009,“ the Tribunal said.

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On the dismissal of the case against Diabor, “all the evidence put up by the Commission in relation to Diabor was not only of a hearsay nature but was based on hearsay upon hearsay and remained untested…The Tribunal has found that the Commission has not, on a balance of probabilities, discharged its onus to show that Diabor was involved in any collusive arrangements,” the Tribunal said.

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