/ 8 March 2012

Cartel charges cemented as Lafarge takes on R149m fine

South African cement producer Lafarge Industries SA has admitted to participating in a cartel since 1996, and agreed to pay a fine of R149-million.

This follows the Competition Commission’s investigation into the South African cement industry, which it launched in 2008.

The Commission raided the premises of four cement producers, Pretoria Portland Cement Company Limited (PPC), Lafarge, AfriSam South Africa and Natal Portland Cement Cimpor on June 24 2009. PPC subsequently applied for leniency and confirmed the existence of a cartel among the four cement producers.

The four cement producers stand accused of price fixing and market division.

Lafarge said on Thursday that its decision was based on investigations it and the Competition Commission conducted, as well as the desire to find a resolution to a dispute that would otherwise have been long and costly.

“These alleged activities took place many years ago,” it said. “In the interests of finding a resolution, the company has agreed to a settlement of R149-million, which represents 6% of 2010 cement turnover.”

The company insisted it was “focused on competing in a fair and robust market”.

Lafarge’s settlement follows the commission’s settlement with AfriSam four months ago, whereby the company agreed to pay a fine of almost R125-million.

AfriSam’s chief executive Stephan Olivier told Engineering News at the time that he was “saddened and embarrassed by what has happened“.

“We cooperated fully with the Competition Commission investigation,” said Olivier. “To facilitate this process we conducted a systematic and comprehensive review of some of the company’s business practices from a competition law perspective.”

“We reported certain historical practices to the commission,” said Olivier.

This leaves Natal Portland Cement Cimpor as the only cement producer which has not settled and the commission says its expects to refer the case against the company to the Competition Tribunal within a month.

If Natal Portland Cement Cimpor does not settle with the commission and decides to contest the tribunal hearing, it is likely to face a much larger potential fine, if found guilty.

On Thursday, the commission said that the “four cement producers agreed to divide the cement market amongst them by allocating each producer the market share that it held prior to 1996, when a lawful cement cartel existed”.

“This arrangement was bolstered by various meetings and contacts between the cement producers, inside and outside South Africa.”

“The four cement producers also submitted sales information to the Cement and Concrete Institute and used the aggregated information received from the Cement and Concrete Institute as a mechanism for maintaining their arrangement.”

Lafarge has agreed to refrain from engaging in this conduct and to develop and implement a compliance programme for all its employees.

Natal Portland Cement Cimpor was not immediately available for comment.