Five LPG companies have been referred by the Competition Commission to the Competition Tribunal for prosecution for cartel conduct. Photo: Reuters

PRETORIA – Five liquefied petroleum gas (LPG) companies have been referred by the Competition Commission to the Competition Tribunal for prosecution for cartel conduct and fixing gas cylinder prices.

Sipho Ngwema, head of communications at the commission, confirmed yesterday that the companies referred to the tribunal for prosecution were Totalgaz Southern Africa, Oryx Oil South Africa, KayaGas, Easigas and African Oxygen (Afrox).

Ngwema said the commission had asked the tribunal to impose an administrative penalty of 10 percent of the annual turnover of each of the firms with the exception of Afrox.

It is believed that an administrative penalty was not being sought against Afrox because it was the corporate leniency applicant, but the commission declined to confirm this.

The referral follows an investigation initiated by the commission in August 2015 against the LPG companies for allegedly entering into an agreement and/or engaging in a concerted practice to fix the price paid as a deposit fee for LPG cylinders by first-time buyers of LPG in contravention of the Competition Act.

Commission investigators conducted a search and seizure operation at the premises of the five companies in October 2015 and seized hard copy documents and electronic data.

The raid

The offices of the Liquefied Petroleum Gas Safety Association of Southern Africa were included in the raid.

The commission said at the time that the raids were not prompted by the LPG market inquiry by the commission that was then under way.

The investigation found that from 2015 to date the five companies agreed on the amount to be paid as a deposit fee for the LPG cylinder by first-time buyers of LPG, which amounted to price fixing and was a contravention of the Competition Act.

The LPG market inquiry report released by the commission in April last year revealed there were only four major wholesalers accounting for more than 90 percent of the market; which was an anomaly the commission needed to keep monitoring “as the structure is conducive for collusive behaviour”.

It recommended price and regulatory changes, adding the commission believed collusion in cylinder deposits had taken place and the conduct was likely to be continuing.

The report said the Department of Energy, as a regulatory authority, had not reviewed cylinder deposit fees since 2010 and recommended the National Energy Regulator of South Africa, rather than the energy department, should be responsible for the determination of the deposit fees and subsequent annual reviews.

The report added the cylinder exchange practice acted as a potential barrier to entry into the cylinder market because it was governed through bilateral agreements. It said participation by new entrants had been difficult and smaller wholesalers faced barriers.