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COMPETITION TRIBUNAL

REPUBLIC OF SOUTH AFRICA

Case No: 43/CR/Jun11

In the matter between:

The Competition Commission …..............................................................................Applicant

and

Sentraal-Suid Co-operative Limited …..................................................................Respondent

Panel :	N Manoim (Presiding Member), Y Carrim (Tribunal
	Member), and A Wessels (Tribunal Member)
Heard on :	07 September 2011
Decided on :	07 September 2011

Order

The Tribunal hereby confirms the order as agreed to and proposed by the Competition Commission and the respondent, annexed hereto marked "A".

Presiding Member

N Manoim

Concurring: Y Carrim and A Wessels

IN THE COMPETITION TRIBUNAL OF SOUTH AFRICA

HELD IN PRETORIA

GT Case No.

CC Case No. 2009Mar4349

In the matter between:-

THE COMPETITION COMMISSION

and

SENTRAAL-SUID CO-OPERATIVE LIMITED 9^th Respondent

in re:

THE: COMPETITION COMMISSION

And

AFGRI OPERATIONS LIMITED 1^st Respondent

SENWES LIMITED 2^pd Respondent

NWK LIMITED 3^rd Respondent

OVK OPERATIONS LIMITED 4^th Respondent

SUIDWES AGRICULTURE (PTY) LIMITED 5^th Respondent

VRYSTAAT KOOPERASIE BEPERK 6th Respondent

OVERBERG AGRI BEDRYWE (PTY) LIMITED 7^th Respondent

DIE HUMAN SDORPSE KOOPERASIE BEPERK 8^th Respondent

SENTRAAL SUID C00-OPERATIVE LIMITED 9^th Respondent

GWK LIMITED 10^th Respondent

KAAP AGRI BEDRYF LIMITED 11^th Respondent

MGR BEDRYFSMAATSKAPPY (PTY) LIMITED 12^th Respondent

TUINROETE AGRI BEPERK 13th Respondent

MOORREESBURGSE KORlNGBOERE (PTY) LIMITED 14^th Respondent

TWKLANDBOU BEPERK 15^th Respondent

NTK LIMPOPO AGRIC BEPERK 16^th Respondent

GRAIN SILO INDUSTRY (PTY) LTD 17^th Respondent

CONSENT AGREEMENT IN TERMS OF SECTION 49D READ WITH SECTION 5&f1)(a)(iff) add 58(1)(i» OF THE COMPETITION ACT, 1993 (ACT NO, 89 OF 1998), AS AMENDED, BETWEEN THE COMPETITION COMMISSION ("THE COMMISSION") AND SENTRAAL-SUID CO-OPERATIVE LIMITED ("SSKV), IN RESPECT OF AN ALLEGED CONTRAVENTION OF SECTION 4(1)(b)(i) OF THE COMPETITION ACT, 1998 ("THE ACT").

The Commission and SSK hereby agree that application be made to the Tribunal for the confirmation of this Consent Agreement in terms of section 58 (1)(a)(iii) as read with section 58{1)(b) of the Competition Act, 1998 (Act No. 89 of 1998), as amended, on the terms set out beiow:

1. Definitions

For the purposes of this Consent Agreement the following definitions shall apply:

1.1."Act means the Competition Act, 1998 (Act No. 89 of 1998), as amended;;

1.2. "Commission* means the Competition Commission of South Africa, a statutory body established in terms of section 19 of the Act, with its principal place of business at 1^sl Floor, Muiayo Building (Block C), the dti Campus, 7? Meintjies Street, Sunnyside, Pretoria, Gauteng;

1.3. "Commissioner" means the Commissioner of the Commission, appointed in terms of section 22 of the Act;

1.4. 'Complaint' means the complaint under case number 2009Mar4349 initiated by the Commissioner in terms of section 49B of the Acf, including a complaint concerned with allegations of price fixing in terms of section 4(1)(b)(i) of the Act initiated on 17 March 2009 as weii as an expanded initiation on 25 May 2010 after the decision was made to include aii the members and shareholders of the Grain Siio industry;

1.5. "Consent Agreement" means this agreement duly signed and concluded between the Commission and SSK;

1.6. "Grain Silo Industry" means Grain Siio industry (Pty) Ltd, a private company duly incorporated in accordance with the company laws of the Republic of South Africa, having its registered offices at Lynwood Corporate Park, Aikantrantstraat, Lynwood Manor, Pretoria, Gauteng Province. The GSl represents its members in public forums wherein matters related to the storage and trading of grain and oilseeds are discussed and provides specialist research services that members may request on an ad-hoc basis. The GSl represents its constituent members in interactions with the Agricultural Products Division of the Johannesburg Stock Exchange (the "APD" previously "SAFHX").

1.7. "SSK" means Senfraai-Suid Co-operative Limited, an agricultural co­operative with limited liability registered in accordance with the laws of the Republic of South-Africa with registration number K6/3/3/115 and with its registered office and main place of business at Voortrekstraat 34, Swellendam, Wes Kaap, Suid Afrlka, 6740,

1.8. "Parties"means the Commission and SSK;

1.9. "Respondent" means for purposes of this agreement SSK;

1.10. "Respondents" means Respondents one (1} to seventeen (17) described above;

1.11. "Safex" means the South African Futures Exchange which was established to provide market participants with a price determination mechanism and a price risk management facility through which they can manage their exposure to adverse price movements in the underlying commodity.

1.12. "Tribune?¹ means the Competition Tribunal of South Africa, a statutory body established in terms of section 26 of the Act, with its principal place of business at 3^rt Fioor, Mulayo building (Block C), the dti Campus, 77 Merntjies Street Sunnyslde, Pretoria, Gauteng.

2. The Complaint and Complaint Investigation

2.1. On 17 March 2009 the Commissioner initiated a complaint against Afgri Operations Limited ("Afgri"), Senwes Limited ("Senwes"), Noord-Wes Kooperasie Limited ("NvVK"), OVK Operations Limited ("OVK"), Suidwes (Pty) Limited ("Suidwes"), Vrystaatse KoOperasie Limited ("VKB") and the Grain Siio industry ("GS1") for alleged contravention of section 4(1)(b)(i) of the Act.

2.2. The investigation revealed that the storage rate fs agreed to and assented to not only by the entities against whom the original complaints initiation was made, but by aif members and shareholders of GSl. in the circumstances, on 25 May 2010 the Commissioner expanded the investigation to refer to ail seventeen (17) respondents.

2.3. The Commission conducted its investigation and conceded that:

2.3.1. the respondents and GSl have contravened section 4(1){b)(i) of the Act. The essence of the conduct complained of is that the respondents and GSl have contravened section 4(1)(b)(l) of the Act in that they fix the prices of the daily storage tariff for the storage of grain. This is done for application throughout the Republic. The first to sixteenth respondents are all former cooperatives who own grain storage silos and provide other agricultural services and are competitors in the market for grain storage,

2.4. The Commission found that;

2.4.1. Notwithstanding the fact that they are competitors, the first to sixteenth respondents are alt shareholders or members of the GSl. Although the GSl ss a private company, it amounts to an industry association for members of the grain storage industry. SAF&X placed the onus for the determination of the storage rate on the GSl on the basis that it had the necessary knowledge and understanding of the costs Involved in providing storage. Until 2008, SAFEX requested the standardised tariff from the GSl on an annua! basis, in 2008, as is set out below, the GSl declined to provide the standardised storage tariff to SAFEX any longer on account of the Commission's contentions that it and its members were contravening section 4(1)(b)(i) of the Act.

2.4.2. if was the GSI's technical committee that was responsible for fixing the daiiy storage tariff on behalf ■ of. the GS! and its members, In response to requests from SAFEX_t the GS! consulted its shareholders, The shareholders submitted individual proposals as to the appropriate storage rate to GSf. These rates were collated and evaluated by the GSI's technical committee, the members of which are from competing silo companies. The technical committee then decided on a rate and this was then submitted to SAFKXon behaif of GSl and its shareholders.

2.4.3. The essence of the conduct complained of is that the daily storage tariff proposed by GSi is agreed to and assented to by all of the respondents. Given that the first to sixteenth respondents are all competitors in the provision of storage services, the joint determination of the daiiy storage rate amounts to prohibited price fixing in that it quite simply amounts to an agreement between firms in a horizontal relationship for the direct fixing of storage prices.

2.4.4. The manner in which the SAFEXstorage tariff is determined is, in the Commission's view, restrictive of competition. In addition to agreeing to the SAFEX rate, the respondents exchanged detailed cost information in addition, the storage tariff determined for SAFEX purposes has been used to determine storage fees in respect of sales transactions in the physical market. This amount to coitusion.

2.5. . The Commission took a decision to refer to the Tribunal its complaint that is described above.

3. Statement of conduct by SSK

3.1. SSK admits that, as a member of the GSI, it was asked on two occasions for input regarding the standardised daiiy wheat storage tariff which were to be recommended to SAFBX, namely:

3.1.1. via e-mail during February 2003;

3.1.2. via e-mail in June 2007 when it was requested to indicate if its systems could accommodate % cent tariffs.

3.2. SSK therefore participated, to the aforesaid limited extent, in agreeing on the standardised daily wheat storage tariffs which were recommended to SAFEX. As it had {and still has) no other option in the market
circumstances, it also used the SAFEX daily wheat storage tariffs in respect of transactions in the physical market

3.3. Although SSK acted bona fides, it accepts that its aforesaid conduct may be perceived as constituting a contravention of section 4(1){b)(i) of the Act.

4. Administrative Penalty

4.1. Having regard to the provisions of sections 58(1)(a)(iil) as read with sections 59(1 ){a), 59(2) and 59(3) of the Act, SSK accepts that a contravention of section 4(1)(b)(i) may lead to the imposition of an administrative penalty where the Tribunal deems it appropriate.

4.2. SSK will therefore pay an administrative penalty in the amount of R75 852.04.

4.3. This amount constitutes 4% (four per cent) of the tote! wheat daily storage tariff silo turnover for the 2009 financial year;

4.4. SSK will pay the amount set out in paragraph 4.2 above to the Commission upon the date of confirmation of this Consent Agreement by the Tribunal.

4.5. This payment shall be made into the Commission's bank account, details of which are as follows:

Bank name; Absa Bank

Branch name: Pretoria

Account holder: Competition Commission Fees Account

Account number; 4050778576

Account type: Current Account

Branch Code: 323 345

4.6. The payment will be paid over by the Commission to the National Revenue Fund In accordance with section 59(4) of the Act.

5. Agreement Concerning Future Conduct

5.1. SSK agrees to fully cooperate with the Commission in relation to the prosecution of the complaint referral. Without limiting the generality of the foregoing, SSK specifically agrees to:

5.1.1. Testify in the complaint referral (if any) in respect of alleged contraventions covered by this Consent Agreement; and

5.12. To the extent that it is in existence, provide evidence, written or otherwise, which is in its possession or under its control, concerning the alleged contraventions contained in this Consent Agreement.

5.2. SSK agrees that it will in future refrain from the provision of contractual undertakings that have the potential to constitute contraventions of section 4(1 )(b) of the Act.

5.3. SSK shall develop, implement and monitor a competition law compliance programme incorporating corporate governance designed to ensure that its employees, management, directors and agents do not engage in future contraventions of the Competition Act. In particular, SSK shall:

5.3.1 draft and implement a competition policy and compliance programme;

5.3.2. provide training on competition law compliance on issues particularly relevant to SSK and its employees and officials;

5.3.3. provide training on competition law compliance to all persons andfor officials employed by SSK in managerial and marketing capacities after the confirmation of this Consent Agreement by the Tribunal;

5.3.4. update the competition policy and training annually to ensure SSK's continued compliance with the Act.

5.4. SSK shall submit a copy of such compliance programme to the Commission within 60 days of the date of confirmation of the Consent Agreement by the Tribunal.

6. Full and Final Settlement

This agreement, upon confirmation as an order by the Tribunal, is entered into in full and final settlement and concludes ail proceedings between the Commission and SSK relating to any alleged contravention by the Respondents of the Act that is the subject of the Commission's investigation under case no 2009Mar4349.

Dated and signed at Swellendam on the 22^nd day of June 2011

For SSK

Chief Executive Officer

Dated and signed at Pretoria on the 23^rd day of June 2011

For the Commission's

Competition Commissioner

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