Facts:
On 13 February 2009, the Commission referred a complaint to the Competition Tribunal of South Africa (Tribunal) for contravention of s 4(1)(b) of the Competition Act. The Commission had initiated an investigation after receiving an application from Rocla for leniency in terms of the Commission’s corporate leniency policy on 7 December 2007 in which Rocla alleged that the above-mentioned firms were members of a cartel. On 18 March 2008, the Commission initiated an investigation and found that the cartel operated from 1973 until 2007 in Gauteng, Kwa-Zulu Natal and in the Western Cape.
Shortly after the complaint was filed, 4 of the firms obtained consent orders, D&D and Craig Concrete no longer existed, SPC and Concrite admitted their involvement but disputed the quantum of the penalty imposed and Galio denied involvement.
The national cartel commenced in 1973 and was founded by Rocla and grew over the years and regional cartels were also formed. Members met regularly, every second Tuesday of the month after Concrete Manufactures Association meetings. Secret informal meetings were also held at different locations. In allocating contracts, the respondents would identify and compile a list of all available tenders, agree among themselves who would be allocated what work and on prices to be quoted for tenders. These allocations occurred in monthly meetings in which a cartel member known as the ‘banker’ presented a list of all available contracts. The banker would compile a comprehensive list of all tenders available and a summary of product delivered by each respondent over a particular period, in order to enable the cartel to monitor adherence to agreed tonnages. Members were limited to producing certain products in certain regions, allocated geographic markets and couldn’t increase market shares except by expanding through acquisition of existing competitors. The cartel members also developed a document called the Modus Operandi, which identified each cartel member, by a number to conceal the identity of the cartel members. The Modus Operandi reflected the agreed percentages for each cartel member; a geographic market allocation arrangement splitting up the production and sales of pipes, culverts and manholes; as well as a split of the precast concrete products which each firm could produce and sell in each identified market. Furthermore there were sanctions for non-compliance, payments to keep competition out of the market, intent and ability to raise prices and effective monitoring mechanisms.

Southern Pipeline contractors (tribunal)
Facts: Southern Pipeline Contractors and Conrite admitted contravention of s 4(1)(b) of the Act however rejected the penalty imposed and therefore approached the Tribunal.
Argument:
Commission: argued that there was no legislative basis for the Tribunal to limit the imposition of the penalty to affected turnover only and that the firm’s annual total turnover should be subject to sanction. They argued that the affected turnover for SPC should only exclude civil engineering activies.
SPC: SPC argued that the affected turnover should exclude in-out costs, civil engineering activities and concrete products supplied to the Gautrain project. Furthermore they listed a number of factors the tribunal should consider.
Conrite: listed a number of mitigating factors court should consider.
Tribunal decision and reasoning
The Tribunal considered the approach by other jurisdictions in calculating a penalty. Than proceeded look at each parties’ relevant conduct. Looked at the nature, duration and extent of contraventions.
Imposed a penalty of R16 882 597 on SPC (10% of total turnover) and Conrite was fined R 6 192 457 (8% of total turnover).

Analysis
The approach followed by the Tribunal in this case shows that penalties for cartels of long duration will attract maximum penalties.

Appeal
Facts: both SPC and Conrite appealed the Tribunal’s decision.
SPC Argument

In its appeal, first appellant argued against the decision of the Tribunal for mainly 3 reasons (i) that the Tribunal was incorrect in basing its penalty on SPC’s total turnover for the preceding year (ii) the Tribunal erred in accepting the Commission’s calculations of SPC’s net affected turnover and (iii) that the Tribunal unfairly imposed the maximum penalty when there were mitigating factors warranting a reduced percentage in calculating the appropriate penalty.

Conrite Argument

Conrite argued that the tribunal had failed to take into consideration that the second appellant was only part of a smaller cartel which only operates in Durban not nationally or regionally, and that the activities of the regional or national cartel cannot be imputed to them.
It was further argued by Conrite that the tribunal disregarded its evidence and ignored the fact that they did not enjoy considerable benefit from the cartel as Conrite still had to compete with the firms that were not parties to the verbal cartel agreement. Further, Conrite argued that there was no link between its exit from the cartel and its subsequent success in the toilet market.

Competition Appeal Court Decision and reasoning

In its evaluation and decision, the CAC deemed the Tribunals approach to determining an appropriate penalty as incorrect, both in its calculations and interpretation of the legislative framework and lowered the fines. It was held that the tribual failed to consider relevant factors and incorrectly applied the concept of annual turnovers stipulated by the act.
CAC endorsed the EU approach to the calculation of penalties, and recommended that regard be had to the EU guidelines of 2006.

The Competition Commission v Gralio Precast (pty) Ltd.tribunal
Galio: admitted the existence of the cartel in Kwa-Zulu Natal but denied participatition in the cartel and claimed they were unaware of its existence until the Commission made contact during its investigations.
Commission: Gralio participated, together with a number of other companies operating in the field of precast concrete products, in a cartel which engaged in inter alia price fixing, division of markets, and collusive tendering, in contravention of Sections 4(1)(b)(i),(ii), and (iii) of the Competition Act.
Decision: Tribunal dismissed the complaint that Gralio was a member of a cartel in the concrete pipes industry in KwaZulu Natal stating that “Gralio has not been shown to have been party to an agreement or concerted practice” and that “Grallio’s actions were diametrically opposed to the consensus of the cartel”
The Court: The Competition Appeal Court. 107/CAC/Dec10. 20 October 2011.
Appeal
Facts: both parties appealed the decision of the tribunal
Outcome and reasoning: appeal was dismissed. The tribunal found that there was insufficient evidence before it to conclude that the respondent had indeed entered into the agreement.
Analysis: the court lays down the principle that states that restrictive horizontal practices by an individual will not be imputed to a firm unless the individual has the authority to enter into agreements that are legally binding on the firm. For a company to be part of a cartel, it must have been clearly involved in the drafting of the modus operandi.

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[ 1 ]. The firms were competitors in the market for the production and supply of precast concrete products: largely pipes, culverts, manholes and pre-stressed concrete sleepers. Customers used these products in the construction of roads, pipelines, bridges, sewerage systems and other major infrastructure developments.
[ 2 ]. para 6. Avenge agreed to pay a penalty of R46 277 000(8% of turnover), Concrete Units agreed to pay R5 763 743 (7% of turnover), Cobro Contrators agreed to pay R4 022 568 (6.5% of turnover) and Cape Concrete agreed to pay R4 371 386 (7% of turnover).
[ 3 ]. Para 13-15
[ 4 ]. para 24. In closing argument the commission stated that the tribunal could use affected turnover for the basis for computing the penalty but was not limited to 10% provided the fine didn’t exceed the maximum penalty of 10% of annual turnover.
[ 5 ]. Thus the affected turnover was R 123 889 981
[ 6 ]. SPC argued that they joined the cartel for fear of being undercut and driven out of business, thy were never involved in the market for culverts, the cartel didn’t furnish any meaningful benefit to its members and despite entering into agreement for the Gautrain project, it was never carried through.
[ 7 ]. Conrite argued they existed the manhole market because they couldn’t tender for most work as they had no SABS approval and had limited involvement.
[ 8 ]. Para 27-40 and noted that’s SA has no guidelines currently in relation to calculation of penalties.
[ 9 ]. SPC: joined the cartel in 1994, it was allocated 12.5% share of the sale of storm water and sewer pipes and competed with 150km radius of Johannesburg (market share increased to 27% when they acquired Craig Concrete). Furthermore they were forbidden from entering the market for culvets and manholes in Gauteng, prices were agreed to and they were a party to a collusive tending agreement in the Gautrain project.
Conrite: joined the cartel in 2000/1, allocated 15% of the market, agreed to prcing guidelies, met every two/three months, allocated available work and agreedto exist the manhole market.
[ 10 ]. They argued that an amount of R32 371 630 which did not constitute turnover had been incorrectly included as turnover and an amount of R42 834 295 ought to have been excluded from the calculation of SPC’s net affected turnover as this amount did not arise from cartel activity
[ 11 ]. SLC’s fine was reduced to R8 720 000(20% of affected turnover) and Conrite’s fine was reduced to R 2 037 070 (7% of affected turnover).
[ 12 ]. According to the court the correct approach impugned from s59 of the Act is that once a prohibited practice has been determined an administrative penalty may then be imposed taking into account the all the factors in s59 (3). It is only once an appropriate penalty has been determined, taking into account factors in s59 (3), does the cap in s59 (2) become relevant to ensure the penalty imposed does not exceed it.
[ 13 ]. Para 45
[ 14 ]. The court defined implied authority as authority that is automatically bestowed upon a person due to the position they hold within the principle firm. The court then defined ostensible authority as authority that is bestowed upon the person by the principles conduct in relation to the relevant activity or transaction. The court concluded that there was nothing to suggest that Mr. Hansen was consistently referred to as a mere ‘agent’ of the respondent. This confirms the principle that a mere agent cannot bind a company in agreements for purposes of the Act.