Johannesburg - The Competition Commission yesterday slapped South Africa’s largest steel producer, ArcelorMittal, with a R1.5 billion fine for its involvement in the long steel and scrap metal cartels.
The settlement - the largest fine for a South African company - brings to an end various anticompetition investigations and complaints against the company.
The investigations, which have been going on for several years, include those that relate to participation in long steel, flat steel and scrap metal cartels.
“(ArcelorMittal) admits that it engaged in collusion with (scarp-based steel making company) Cisco, (steel and steel product manufacturer) Scaw and (wire and steel manufacturer) Cape Gate by fixing prices and discounts, allocating customers and sharing commercially sensitive information in the market for the manufacture of long steel products, in contravention of the Competition Act. (It) also admits that it fixed the purchased price of scrap metal with Columbus Steel, Cape Gate and Scaw,” the commission said.
ArcelorMittal said it had admitted guilt in respect of the allegations of price-fixing, allocating customers and sharing commercially sensitive information in the long steel market, as well as the allegations of price-fixing by the company as a consumer of scrap. “The company has made no admission regarding the excessive pricing complaint and the Competition Commission has made no finding in this regard,” ArcelorMittal said.
The commission said ArcelorMittal had undertaken that, for five years, it would limit its earnings before interest and tax margin to a cap of 10 percent for flat steel products sold in South Africa. The watchdog body said the margin could rise to 15 percent “if certain market circumstances set out in the settlement agreement arise”.
ArcelorMittal also agreed to a R4.6bn capital expenditure over the next five years. But the company said it was committed to the capital expenditure “subject to it being affordable and feasible in the light of the current financial circumstances”.
The commission said it had filed an application with the Competition Tribunal for confirmation of the settlement agreement as an order of the tribunal.
Minister of Economic Development, Ebrahim Patel, weighed in on the hefty fine yesterday and said government wanted to see competitive steel prices and would monitor steel price increases. He said the government would not hesitate to act against any further abuse of market power in the steel industry.
Patel said the government recently brought into effect provisions in the Competition Act that criminalised collusion and that could see directors and employees found guilty facing up to 10 years in jail.
“The action by the competition authorities is part of a crackdown against abuse of market power and price-fixing that undermines the performance of the economy, imposes unnecessary costs on downstream factories and damages local jobs,” Patel said.
“South Africa’s competitiveness and industrial performance require an efficient basic steel supplier industry. High levels of concentration together with collusion undermine our national goals. Companies collude because they believe they can get away with it,” he said.
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