Eight named in South African bitumen probe

By Chris Sleight09 March 2010

The South African Competition Commission has referred seven companies and one trade association to a tribunal that will adjudicate on whether they colluded to fix prices for bitumen. However, the defendants say the agreement was designed to provide price stability and transparency.

The Commission opened its investigation in January last year when Sasol and its subsidiary Tosas - two of the companies named - applied for leniency in exchange for information about price fixing in the sector. The two companies have since been granted conditional immunity from prosecution, and the Commission is not seeking to fine them.

According to Sasol and the Commission, prices were fixed by Chevron, Engen, Masana Petroleum Solution, Sasol, Shell, Total and Tosas through meetings held under the auspices of the South African Bitumen and Tar Association (SABITA).

However, a statement from SABITA said, "Under scrutiny is a matter that was initiated around 2001 with the intent to bring about a transparent mechanism that would deal with the rise and fall of the bitumen component in asphalt costs. As road building contracts could span lengthy periods, a mechanism was sought to minimise uncertainty of input costs, resulting largely from externalities such as crude costs and exchange rate fluctuations.

"Due to various parties not being able to reach agreement, this however was never implemented as intended. The intent of this initiative was to bring about a transparent mechanism between contractors and client bodies that would deal with input cost fluctuations and never to flout competition law."

However, a statement from the Commission said, "In its investigation the Commission found that the respondents engaged in collusive conduct from around 2000 until at least December 2009. The respondents collectively determined and agreed on pricing principles, including a starting reference price and monthly price adjustment mechanism."

The Commission has already agreed a fine of ZAR 13 million (US$ 1.76 million). It is asking the tribunal to fine Chevron, Engen, Shell, Total and SABITA 10% of their annual revenues.

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