Members of South Africa’s alleged wire cartel have been accused of using anti-competitive practices to scupper a wire importer from entering the market.
This follows the announcement last month that the Competition Commission had referred a case against 12 wire manufacturers to the Competition Tribunal.
The wire manufacturers stand accused of running a national cartel between 2001 and 2008.
One of the 12 wire manufacturers, AgriWire, now stands accused of removing a competitor’s products from the market and replacing them with its own equivalent wire products.
The fresh allegations of potential anti-competitive practices were made by Clive Coetzee who runs a wire importing company by the name of CKW Wire Products.
“This cartel has cost me millions of rands and I am seriously considering having a go at them in a civil claim,” said Coetzee.
Coetzee’s allegations were backed up by Colin van Dallen from the Overberg Agri co-op, who admitted to the Mail & Guardian that AgriWire had purchased CKW’s wire products from him and he had in turn ordered wire from AgriWire.
The Overberg Agri co-op acts as a middleman from whom farmers buy a range of products.
When the M&G asked Van Dallen why AgriWire would purchase its competitor’s product, he claimed to have no idea, but did venture “they probably thought it was good to get it out of the market”.
If AgriWire’s intention was to remove their competition from the market place, then the allegations could amount to a potential violation of the Competition Act.
AgriWire director Rick Allen admitted that it did buy the CKW wire from Overberg, which he says it used for a “less critical application”.
He also admitted that AgriWire had sold SABS specification wire in its place to be used in vineyards.
Van Dallen said that the farmers did not want to purchase CKW’s wire and he did not want to sit with the stock, so he sold it to AgriWire.
“They paid me for it and I bought new wire,” he said. “There was nothing funny going on.”
Coetzee claimed that Overberg Agri were threatened by wire manufacturers from the alleged cartel, who threatened to not supply the co-op with other products that his company did not supply.
However, this was disputed by Van Dallen, who said that there was no way that the wire manufacturers could threaten the co-ops.
“We wouldn’t stand for anything like that,” he said.
Coetzee also alleged that when he started up his company in 2007, importing wire products from China, that the South African Wire Association (Sawa) took out an advertisement in the Landbou Weekblad warning farmers against imported wire products, claiming that they may be cheaper, but wouldn’t last long and would rust quickly.
“How can you warn farmers about imported wire if you don’t name and shame the bad quality wire?” asked Coetzee. “They rubbished my product as I got into the market.”
Coetzee said that, after the advertisement had appeared, he approached Sawa to complain and had a long discussion about it with the association’s director, Dries Olivier, who has since passed away.
Allen, who is also the current chairman of Sawa, said it always acted in the best interests of the South African wire industry.
“Wire-producing members all produce to an SABS specification,” said Allen.
“It was felt necessary to bring to the attention of the agricultural market, which has expectations of 20 years-plus for wire, that some imported wire was of an inferior quality.
“This is important as traceability of wire is difficult and our members can face claims 10 years down the line for wire not supplied by them,” said Allen.
Coetzee said he discussed with Olivier the possibility of joining the wire association, but that to this day, he has still not received the forms that he needed to complete to register as a member.
The Commission’s Case
The Competition Commission’s case against 12 wire manufacturers was referred to the Competition Tribunal for prosecution last month. The commission is alleging that between 2001 and 2008 the wire manufacturers were involved in price-fixing, market division and collusive tendering.
This follows the referral to the tribunal in January 2007 of a case against six wire manufacturers that were alleged to have fixed prices for wire products. The 2007 case was set to go before the tribunal on October 5 2009. However, the commission has asked for a postponement so that it can consolidate both cases.
In the 2007 case Allens Meshco, Wireforce Steelbar, Hendok, Galvwire, Independent Galvanising and Meshrite stand accused of price-fixing, while in the 2009 case Cape Gate, Allens Meshco, Hendok, Wireforce Steelbar, AgriWire, AgriWire North, AgriWire Upington, Cape Wire, Forest Wire, Independent Galvanising, Associated Wire Industries and Consolidated Wire Industries (CWI) all stand accused of various forms of collusion.
CWI has been granted conditional corporate leniency after it came forward to spill the beans on its fellow colluders. The commission’s case looks set to focus on how smaller players have arranged themselves into a coalition. Central to the case is the fact that 10 of the 12 accused all have Rick Allen as a director or a “substantial shareholder”.
The commission’s referral affidavit seems to suggest that Allen may be a ringleader of the cartel, detailing a number of alleged meetings held between the wire manufactures, including some where Allen is said to have represented numerous wire manufacturers.
However, Allen has denied this, stating that he is a director of the Allens Meshco group, made up of 10 of the wire manufacturers listed in the affidavit, which was set up to establish buying power on steel and improve distribution because the industry was being run by the steel manufacturers.
Allen said that to suggest that Allens Meshco is a ringleader is “far-fetched and does not stack up against the facts”.