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JOHANNESBURG - The inner workings of a cartel in the geotechnical industry has been laid bare in a Competition Tribunal hearing into alleged collusion, price fixing and market division and market, customer and territory allocation in contravention of the Competition Act by listed Esor and Diabor.

The case was set down for oral evidence by the tribunal for six days, but had not been concluded by Tuesday, the last scheduled date.

New dates would now have to be arranged between the tribunal panel members hearing the case and the legal representatives of the parties.

The geotechnical services cartel revelations to the tribunal have come from Kenneth Jones, a former general manager of the ground engineering division of Grinaker-LTA, which is part of listed Aveng.

Jones referred to a KwaZulu-Natal “book club” or cartel, which agreed in a meeting what conduct was required for members to stay in the cartel.

He added that a set of rules, with penalties for non-compliance, was also established similar to the arrangement in Johannesburg, because it was clear that not all members were sticking to the verbal agreements.

Jones said a cover price would be applicable to either a tender that was part of both the formal arrangement and ad hoc agreements, because in either two scenarios it was agreed that a particular tenderer would get that job provided the price was within reason.

“Normally that cover price would be a minimum of 5percent more than the tenderer that was allocated that particular project through one of those two arrangements,” he said.

Jones said at a particular stage Frank van Niekerk, the owner of V&A Piling, which only operated in Durban, was quite aggressive, because he wanted a higher percentage.

He said Van Niekerk was threatening to “become a terrorist” in Gauteng because he knew there was a cartel arrangement in Johannesburg as well and by moving up to the area to conduct work there he would disrupt that cartel.

Jones said that a tender would be allocated to a particular tenderer based on “the book” prior to the submission of the bids.

The “book” and “scorecard” refers to records that were kept of tenders awarded to ensure that tenders were allocated so that the market shares of the members of the cartel were maintained at the same level.

“Once that tenderer had worked out the price, they would then discuss it with other tenderers and it was not just to give them the price.

“It was also to get agreement from them that they were comfortable with the price they were going in at.

Uncomfortable

“So if they felt that we were overpricing by too much and they were uncomfortable with the price, they could challenge it and they would say: ‘No, we are sorry we cannot cover that price. We feel it is too high.’

“And if you read the rules, they would then need to get support from I think it was two or three other cartel members to agree that the price was too high and you then had a choice.

“You either brought down the price to something that the other cartel members were comfortable with, which they would then cover by 5percent or more, or you said: ‘Sorry, if that is the case, then we will step back from this one',” he said. Jones said fictitious invoices were created to pay the losing tenderers.

He said an invoice would be generated, for example, from Franki to Ground Engineering, a division of the civil engineering business of Aveng company Grinaker-LTA, for R50000 for five days hire at R10000 a day for a crane or piling machine or some specialist piece of equipment, something that you could not generally hire in the market place.

The tribunal previously confirmed a settlement agreement entered into between Dura Soletanche-Bachy and the Competition Commission in terms of which the firm agreed to pay a fine of R988589.08 for collusive tendering on 11 construction projects and a settlement agreement entered into by Geomechanics in terms of which it agreed to pay a fine of R1.65million for collusive tendering on certain Gautrain projects and the Lesotho Highlands Water project.

A settlement agreement between Rodio Geotechnics and the commission in terms of which it agreed to pay a fine of R885963 for collusive tendering on nine projects in a joint venture with Grinaker-LTA’s ground engineering division was confirmed by the tribunal on the first day of the hearing.

Grinaker-LTA was the leniency applicant in the case.

Nelly Sakata, appearing for the commission, said the cartel conduct spanned over 10, if not 15 years.

Dirk Vetten, counsel for Esorfranki, said his client accepted collusive conduct related to two projects - the Lusip Dam grouting project in Swaziland in 2005 and the Sappi/Saiccor piling project in KwaZulu-Natal in July 2006 - but a further 11 or 12 identified projects were in dispute.

Vetten said claims of Esorfranki’s involvement in these cases were false.

-BUSINESS REPORT