In February 2009 was the day reality caught up with nine firms who have run a hard core cartel in pre-cast concrete products since 1973. On this day the Commission referred yet another cartel case to the Competition Tribunal for adjudication, citing Rocla, Aveng as a holding company (hereafter referred to as Infraset), Southern Pipeline Contractors (SPC), Cobro, Concrete Units, Cape Concrete, Concrite Walls, Grallio, Craig Concrete, and D&D Concrete (hereafter referred to as “the Rocla matter”). On the same day as the Commission referred these charges to the Competition Tribunal, the Commission settled certain particulars of the complaint with Aveng, including an administrative penalty of R46 million.
Rocla, a subsidiary of Murray & Roberts, was granted conditional leniency by the Commission after coming forward in December 2007. Rocla complied with the Commission’s Corporate Leniency Policy (CLP) in providing information which implicated itself and its competitors in price fixing and fixing of trading conditions, market allocation and collusive tendering in the market for pre-cast concrete products such as pipes, manholes and culverts. This information revealed a textbook example of a classic cartel, complete with well written modus operandi, sanctions for non-compliance, payments to keep competition out of the market, intent and ability to raise prices and effective monitoring mechanisms.
It all began in 1973 when enforcement of competition laws was not as rigorous as it is has now become under the democratic dispensation. Rocla embarked on a strategy to cooperate with its competitors rather than compete with them, buy out any firm that posed a serious threat to its market share, and split up regions within which each firm could operate (produce and sell precast concrete products), whilst at the same time reserving certain regions for itself. Over a period of time and with new entry into the market, Rocla together with Infraset actively influenced and co-opted other new firms such as Cape Concrete, Concrete Units, Cobro, Concrite Walls into the cartel. In order to compel reluctant firms to join the cartel, Rocla threatened such firms with price wars and in fact instilled a sense fear in their corporate minds. These threats were not empty as witness accounts show that some of these threats were actually carried out, specifically in KwaZulu-Natal, where the cartel led by Rocla successfully waged a price war to discipline those that had deviated. Despite the smaller firms in this region even forming a counter-cartel around man-holes, ultimately the firms were brought into line with the Rocla cartel, with D&D Concrete also being bought out of the manhole market by Rocla. Concrite Walls paid handsomely by exiting the manhole market for good. The message was loud and clear “don’t play with the big boys if you can’t take the heat”.
The cartel’s Modus Operandi
The nature of the markets for precast concrete products such as pipes and culverts meant that the cartel arrangements covered price fixing, allocation of markets and customers and collusive tendering. The essential arrangements were reduced to writing in Modus Operandi documents, which were revised as required over the three decades.