If there is one name that comes up time and again in relation to the alleged steel and wire cartels it’s Rick Allen.
As the Competition Commission’s investigation of cartels in the steel and wire sectors appears before the Competition Tribunal, the role of Allen has been brought into question.
Not only is he a director of or significant shareholder in 10 of the 12 wire makers alleged by the commission to be part of a wire-fencing cartel, Allen is also alleged to have taken part in collusive meetings held by the wire-mesh cartel, which recently appeared before the Competition Tribunal.
His company, Agri Wire, has lodged an appeal in the North Gauteng High Court to have the commission’s corporate leniency policy declared “unlawful”, which could scupper the commission’s cases against the wire and steel industry and could let a large player like Allen off the hook.
The wire-fencing cartel
Allen first made the headlines when a number of companies in which he has a shareholding were alleged by the -commission to be involved in a wire-manufacturer’s cartel.
Twelve companies were accused of running a national cartel between 2001 and 2008. Ten of them had Allen as a director or a “substantial shareholder”.
The Competition Commission’s referral affidavit seemed to suggest that Allen may be a ringleader of the cartel, detailing a number of alleged meetings held between the wire manufacturers, including some in which Allen is said to have represented numerous wire manufacturers.
Allen has denied being a ringleader, arguing that the 10 wire manufacturers were part of the Allens Meshco Group, which was set up to establish buying power for steel and improve distribution.
The commission’s case against the 12 wire manufacturers follows a referral by the commission in January 2007 of six wire manufacturers which were alleged to have fixed prices for galvanised wire and wire products.
Consolidated Wire Industries has been granted conditional corporate leniency by the commission after coming forward to spill the beans on its fellow colluders. Its majority shareholder is Scaw South Africa, the steel maker that blew the whistle on the alleged steel cartel in July last year. It appears that through Scaw, Consolidated Wire Industries applied for leniency at the same time.
The case is yet to appear before the Competition Tribunal.
The wire-mesh cartel
The wire-mesh cartel recently appeared before the tribunal and although Allen was not a respondent in the case, his name did pop up many times as staffers from the wire mesh makers testified about collusive meetings where prices were fixed, markets divided and -discount rates set.
The Competition Commission referred its case against four wire-mesh manufacturers to the Competition Tribunal in December 2009. It alleges the four colluded by fixing prices and discounts and allocating customers between themselves from 2001 to 2008. The accused are RMS, Aveng (Africa’s) subsidiary Steeldale Mesh, Vulcania Reinforcing and BRC Mesh Reinforcing, a subsidiary of Murray & Roberts Steel.
BRC Mesh Reinforcing approached the commission on September 26 2008 to apply for corporate leniency for its cooperation in spilling the beans on the wire-mesh cartel.
Aveng has admitted its role in the cartel and has settled with the commission, agreeing to pay a fine of R129-million that relates to the two complaints its subsidiary Steeldale is facing in the wire-mesh and reinforcing steel bar cartel cases.
During the tribunal hearing Allen’s name was mentioned numerous times. The first mention came in the witness statement of Pierre Griffin, the former sales and marketing manager at BRC Mesh Reinforcing.
Griffin said the industry held meetings to fix the base price of reinforcing mesh, fix the rates of discounts offered to customers and to agree not to poach one another’s customers. They took place in two forms, formal meetings convened by the South African Fabric Reinforcement Association and informal meetings.
“Minutes of such meetings were sent to Allens Meshco as well as to Hendok, which missed the majority of the Safra meetings,” stated Griffin. Griffin also said that some of the informal meetings took place at the South African Wire Association (Sawa) offices in Edenvale.
“I seem to recall that Rick Allen was a member of Sawa,” he said, as a way of explaining why the meetings took place at this venue. “Rick Allen is the owner of Allens Meshco, which also participated in these meetings to a limited extent,” said Griffin.
Accused companies knew about meetings
Griffin pointed out that the senior management of the accused companies knew about the meetings and the decisions taken in them and said that sometimes the senior managers would hold their own meetings, one of which he attended and so did Rick Allen.
Reinforcing Mesh Solutions (RMS) chairperson Carlo Di Nicola also took the stand and gave details about a meeting he set up with Rick Allen, Steeldale’s André Nienaber and BRC’s Rob Noonan at the RMS Offices.
Di Nicola testified that, at the suggestion of Rick Allen, they agreed to share their market tonnages for the past six months to establish the size of the market and whether they competed with one another for customers.
“We followed this up with a meeting and provided each other with customers’ lists and discussed whether we could agree to respect each other’s markets,” said Di Nicola.
Vulcania Reinforcing’s director, Sean Greve, confirmed in his witness statement that Allen’s involvement was at a senior management level of the cartel. Greve stated that the proposals discussed at the informal meetings were referred for confirmation and approval to the senior management of the respective companies, including Rick Allen, Carlo Di Nicola, Andre Nienaber, Rob Noonan and Allan Koszewski.
“I note that Rick Allen of Allens Meshco, one of the largest reinforcing manufacturers, was situated in Cape Town and accordingly did not attend the informal meetings,” stated Greves. “However, no decisions were made without the approval of Rick Allen.”
In his testimony Greves also said that Rick Allen had tried to prevent his company from securing a supply arrangement with the steel mills.
Agri Wire takes on commission
Another development involving one of Allen’s companies is the legal challenge by Agri Wire to the Competition Commission’s corporate leniency policy, which allows cartel members to snitch on their fellow colluders in exchange for immunity from prosecution.
If Agri Wire’s court application last year to declare “unlawful” the commission’s corporate leniency policy and for it to review and set aside the conditional corporate leniency granted to wire-fencing cartel whistle-blower Consolidated Wire Industries is successful, it could scupper the commission’s cases against the wire and steel industry and could let a large player like Allen off the hook.
Competition Commissioner Shan Ramburuth says the commission is perfectly within its powers to use a tool such as corporate leniency.
“Our corporate leniency policy is an effective tool that we are using wisely and strategically,” said Ramburuth. “It is not a uniquely South African policy, a lot of competition authorities around the world are using corporate leniency successfully.”
Allen denied any wrongdoing at the time.
Rick Allen responds.