Not so fast – construction cartel hit hard

Published On 04/07/2013 | By Martine Phillips | Enforcement

The South African Competition Commission (SACC), for the first time, recently made use of its fast-track settlement procedure penalising 15 members of a construction cartel for bid-rigging.  The SACC and the companies came to an agreed penalty of R1.46 billion rand (approximately AU$164 million) for coordinating tenders.  These settlements were reached under the Construction Fast Track Settlement Process that was launched in February 2011.

The settlement related to the coordination of tenders by a combination of firms for a number of projects, one of which included the 2010 FIFA World Cup. The conduct included:

  • colluding to create the illusion of competition by submitting sham tenders (“cover pricing”) to enable a fellow conspirator to win a tender;
  • agreeing that whoever won a tender would pay the losing bidder a “loser’s fee” to cover their costs of bidding; and
  • sub-contracting to compensate losing bidders.

Even though 21 companies applied for fast-track settlements, revealing over 300 instances of bid rigging, only those instances of bid-rigging occurring after September 2006 could be prosecuted under South Africa’s Competition Act.  A further 3 companies accepted the SACC’s settlement terms. These 3 and other companies implicated during the settlement process will, according to a statement released by the SACC,  now be investigated and prosecuted.

Competition Commissioner, Shan Ramburuth, said that, “in revealing the extent of collusion in the construction industry, the Commission’s fast track settlement broke up existing cartels and created awareness of collusive practices in the industry. Embedding a competitive  culture will be critical to bringing down the costs of future infrastructure investments and will incentivise firms towards innovation and efficiency in future projects”.

Photo credit: ALMA (ESO/NAOJ/NRAO), W. Garnier (ALMA). Acknowledgement: General Dynamics C4 Systems / Foter.com / CC BY

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About The Author

is in the Competition team at King & Wood Mallesons, with experience both in the corporate and litigious sides of competition. She loves online shopping and always looks for the fine print!

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