The Competition Tribunal is mulling over a consent agreement between the Competition Commission and South Africa's major oil companies following previous collusion in liquid fuels. Picture: Reuters
JOHANNESBURG - The Competition Tribunal is mulling over a consent agreement between the Competition Commission and South Africa's major oil companies following previous collusion in liquid fuels.

The consent agreement will guide the future conduct of the companies - Chevron South Africa, Engen, Shell South Africa, Total South Africa, Sasol, BP Southern Africa and the SA Petroleum Industry Association (Sapia).

In October 2012 the commission referred a case of price fixing and market division regarding the supply of diesel against companies to the tribunal for adjudication.

The commission said its investigation, which commenced in January 2009, revealed collusive conduct through extensive exchanges of commercially sensitive information by the oil companies.

It said information exchange started in the late 1980s and, from 2005, largely through Sapia, the trade organisation representing the main petroleum and liquefied petroleum gas companies in South Africa.

Maximum

The commission said the companies had agreed to use the wholesale list selling price (WLSP) - which is the maximum price for diesel - published by the Department of Energy as the basis for pricing diesel to commercial customers. Unlike petrol, the retail price of diesel is not regulated.

The companies allegedly exchanged monthly sales volumes of each oil company, per product category, to defined groups of customers in each magisterial district.

“The information at this level of detail allowed the oil companies to closely track each other’s sales and to align their strategies in the market, eliminating competition between themselves. This also enabled them to divide or allocate markets by deciding not to enter, or compete for, certain geographic markets or customer groupings given the activity of other oil companies in such markets,” the commission said in the 2012 referral of the matter to the tribunal.

In the referral, the commission said it had uncovered wide-ranging understandings about how the industry should operate. “This included influencing regulation of the industry and undermining entry to maintain the status quo,” it said.

Hearing

The tribunal yesterday commenced with a hearing on the confirmation of the agreement between the commission and the oil companies.

The commission requested the tribunal to levy an administrative penalty amounting to 10percent of total turnover of the respondent’s turnover in and export from South Africa in the preceding financial year.

However, the consent agreement does not include an administrative penalty. The companies have agreed to provide data to an independent third party who will collect and aggregate the data across all market participants.

“The undertakings with regard to future conduct would last for a period of five years from the date of the order.

"The undertaking to provide information to a third party does not restrict the respondents from providing information to the Department of Energy if required,” the tribunal said this week.

- BUSINESS REPORT