GD Irons has to pay heavy R4 million fine for collusive tendering
PRETORIA – A construction company has been fined R4 million for engaging in collusive tendering on a project for the construction of a depot for British American Tobacco South Africa (Batsa).
GD Irons admitted to engaging in this collusive conduct with Giuricich on the R50m Batsa project in contravention of the Competition Act.
In terms of the agreement, R1.2m of the fine would be paid within 30 days of the confirmation of the settlement agreement and the remaining R2.8m on the first anniversary of the confirmation of the agreement.
A settlement agreement between the Competition Commission and GD Irons was confirmed by the Competition Tribunal yesterday.
The commission told a tribunal hearing that Giuricich provided a cover price for the tender for the Batsa depot project, with Giuricich in return paying GD Irons a R50 000 loser’s fee.
A cover price is a price obtained or provided by a firm from another competing firm to ensure they were not awarded a contract to prevent them from being removed from the client’s tender list or to anti-competitively co-ordinate the allocation of projects.
The commission said Giuricich submitted a leniency application for their involvement in various collusive conduct cases in terms of the construction fast-track settlement process, with GD Irons implicated in one project.
GD Irons started to engage with the commission in an attempt to settle the matter immediately it was made aware of the case, but the settlement negotiations deadlocked and resulted in a delay. The commission said that in determining the penalty, it had also considered the financial position of GD Irons, which was one of the factors that led to the deadlock.
Yasmin Carrim, the chairperson of the tribunal panel, queried a clause in the settlement agreement that was not usually included in other settlement agreements that stated the current ownership and current shareholders of GD Irons were jointly liable for payment of the fine.
Paul Coetser, appearing for GD Irons, said the company was in the process of becoming 51 percent black-owned and since this contravention happened in 2006, there was a desire to not burden the new shareholders with the fine. He said the existing shareholders, therefore, undertook that the company would pay the fine and if the fine was not fully paid before the implementation of the black economic empowerment transaction, they undertook to pay it themselves.
“It is making sure there is a new dawn for the company going forward and the issues of the past are put behind the company and they would forward with a black empowerment shareholder,” he said.
Coetser stressed that there should not be any problem with the payment of the fine by the existing shareholders, because the purchase agreement regulated this. He said the penalty was 8 percent of the project value, which was quite interesting because Edilcon Construction had also settled on this particular matter with the commission but had paid only 4 percent of the project value.