Serial offender

Sasol’s hopes of putting the cartel conduct in its fertiliser business behind it this week were dashed, with the Competition Commission stating that it was suspicious that the collusion was continuing and that it had launched a separate investigation to look at any collusive conduct taking place after 2005.

Sasol, which was described by Competition Tribunal chairperson David Lewis as a “serial offender”, had its settlement agreement approved by the tribunal and it will now have to fork out a R250-million fine for the collusion that it has admitted took place between 1996 and 2005.

Sasol had originally agreed to a settlement agreement with the commission, which would see it pay a fine of R188-million, but the fine was increased to R250-million after Sasol came forward last week with additional evidence that it had uncovered.

The commission’s head of legal services, Wendy Mkwananzi, said that the additional information had allowed the commission to draw links that it couldn’t before, giving it a clearer understanding of the extent of the collusion, hence the increase in the fine.

Sasol still has to answer to the charges of abuse of dominance and price discrimination that it is facing in the fertiliser investigation, which relate to the collusion that occurred between 1996 and 2005 and could result in a further fine.

The chemical and fuel giant is facing a litany of investigations by the competition authorities that involve its subsidiaries Sasol Nitro, Sasol Oil and Sasol Gas.

These follow the R3.6-billion fine that was meted out by the European Union’s competition authorities for cartel activity by subsidiary Sasol Wax.

Mkwananzi described Sasol senior management’s handling of its own internal investigations into the charges, which were first levelled against it by the commission in 2005, as “negligent” and questioned why it had taken Sasol until late 2008 to uncover the collusion and cartel activity.

Mkwananzi said that the managers at Sasol Nitro had shown “clear disregard” for the commission and its investigation.

“We roundly criticise Sasol for failing to detect this conduct and for failing to investigate the matter earlier,” said Mkwananzi.

Davies said that the discovery of collusive conduct in the Sasol Nitro business had come as a “great shock and deep disappointment” to him.

“As the management of Sasol we accept full responsibility for what happened,” said Davies. “We unequivocally apologise to our stakeholders for the fact that these contraventions have occurred and that we failed to detect them earlier.”

Davies, responding to the claim of negligence, said it related to Sasol’s conduct in the past regarding the commission’s investigation and that it had been complimented by the commission for its cooperation in recent months.

Davies said that a former managing director, a retail manager and a regional marketing manager had been suspended and that 15 former and current employees were being investigated for the role they may have played in the cartel conduct.

Sasol chairperson Hixonia Nyasulu told the tribunal that the Sasol board had requested a full investigation by an external law firm that would investigate any role played by Sasol’s senior executives in the cartel and it would take appropriate action on the findings of the investigation, which is expected to be complete by late 2009.

But Davies would not confirm if the report would be made public.

Cosatu’s Johannes Mosia described the collusion in the fertiliser industry as “outrageous” as it had contributed to high food prices, which impact on poor working-class families and it had threatened South Africa’s food security.

He described Sasol’s conduct as “arrogant” and said multinationals like Sasol “break the law with impunity” because they know they can “buy their way out of trouble.”

“It is becoming clear that it was a serious mistake to privatise Sasol and this is why we are calling for it to be renationalised,” said Mosia.

“This collusive practice might have resulted in jobs being lost in the agricultural sector,” said Mosia. “Many emerging farmers might have been thrown out of business due to this greedy, cruel and inhumane behaviour of companies in the fertiliser industry.”

The Transvaal Agricultural Union’s (TAU) Chris van Zyl said that while Sasol has been fined R250-million, it should be borne in mind that the state becomes the beneficiary of the fine and that those who were initially victimised by the original transgression are not compensated in any way.

Lewis responded to this point by encouraging TAU and Grain SA to look into filing a civil claim against Sasol for damages.

“I don’t think you are going to get a cheque from the state,” said Lewis, who said that the Competition Act does make provisions for damages claims from affected parties.

Grain SA’s Nico Hawkins said grain and oilseeds producers spent R3.4-billion on fertiliser in the 2004-05 financial year, so if the cartel had increased the price of fertiliser by 5% this would add R170-million to the costs for the season.

Sasol’s alleged fellow colluders Omnia and Yarra were present during the hearing, but neither have agreed to settle with the commission and will be contesting the commission’s charges that have been laid against them.

Omnia Holdings managing director Rod Humphris said “the grounds for our defence against the collusion charges levelled against Omnia remain unchanged and we will continue to defend our position while cooperating fully with the authorities”.

Lewis vs Davies
Sasol’s chief executive Pat Davies was subjected to some abrasive cross-examination by the tribunal panel, especially from chairperson David Lewis.

Lewis, who described Sasol as a “serial offender”, said that the explanation of “a few rotten apples” did not wash because of the “extent of the organisation that seems to have been involved in this cartel”.

“What is it in the culture of the company that would make senior employees, knowing that their senior management is opposed to this — that they are breaking the law and that they apparently have no personal gain to derive from this — what is it that makes it so difficult to secure compliance in competition law?” Lewis asked Davies.

“It is an extremely difficult question to answer,” said Davies. “It is very difficult to monitor if compliance is being adhered to or not.

“What is clear to us is that they had the training, they signed for the training, they were fully aware of the policy, they knew what the consequences would be and yet they chose to ignore it,” said Davies.

“Why?” asked Lewis. “Why should we not come to the conclusion that the compliance is a kind of comply, and there is a nudge and a wink that says ‘but conduct business as usual’?

“It would appear to me that the only interested parties are the shareholders, they are the ones who benefit from cartel conduct,” said Lewis. “Now you can’t tell me that these are all people who are so deeply enthralled with the interests of their shareholders that they are prepared to break the law for them?”

Davies answered by admitting that with remuneration packages based around profit and performance there was personal gain to be had for breaking the law in this way.