Johannesburg - Scrap metal dealer, Ton Scrap, has been fined R3.5 million after admitting to contravening the Competition Act by agreeing with its competitors to fix purchasing prices of certain ferrous scrap metals and to allocate suppliers among the large scrap metal merchants.
The Competition Tribunal yesterday confirmed a settlement agreement reached between Ton Scrap, which now trades as Nieuwco, and the Competition Commission in terms of which the firm would pay the fine, which amounts to 5 percent of its annual turnover for ferrous scrap metal for the financial year to February 2005.
The commission’s Korkoi Ayayee told the tribunal hearing that the commission had initiated a complaint in August 2006 against the Reclamation Group, SA Metal & Machinery Company (SAM), National Scrap Metal and Cape Town Iron and Steel Works.
Ayayee said the scope of this investigation was expanded and the commission conducted search and seizure operations at the premises of the Reclamation Group in Johannesburg, Port Elizabeth and Durban in July 2007.
The commission subsequently received information that the Reclamation Group, Abeddac Metals, Amalgamated Metals, Ben Jacobs Metals, Power Metals, SAM and Universal Recycling (URC) were engaged in price-fixing and collusive tendering in regard to various types of non-ferrous scrap metals.
It then initiated a second complaint in August 2007 after it established certain firms were likely to be involved in specific contraventions of the Competition Act that were not identified at the time of the initiation of the first complaint.
Investigation
Ayayee said the investigation revealed there were other arrangements between scrap merchants, including the Reclamation Group, Ton Scrap, URC, Ben Jacobs Iron and Steel and Rand Scrap, and steel mills, such as ArcelorMittal SA, Scaw SA, Columbus Stainless, Highveld Steel & Vanadium and Cape Gate, that could be in contravention of the act.
The commission’s investigation found that prior to the Competition Act coming into effect until early 2008, Ton Scrap, together with other large scrap merchants and large scrap consumers in the inland area, were involved in discussions, meetings and arrangements. During these events they decided the setting of a standard pricing formula to determine the selling price of scrap metal, the premium charged by the large scrap merchants for scrap metal and the collective sourcing or supply of scrap metal by the large scrap consumers and the allocation of scrap metal among them.
Ayayee added that in these meetings, the large scrap merchants would reach an understanding that their market shares and margins would be kept constant, the specific scrap generators were allocated to specific large scrap merchants, and the large scrap merchants also agreed not to poach one another’s suppliers and scrap generators.
She confirmed that with the exception of Ben Jacobs Iron and Steel, the 12 other firms had engaged in this conduct, and had concluded settlement agreements with the commission and were fined between 5 percent and 6 percent of their annual turnover.
BUSINESS REPORT