The construction company WBHO got off lightly for collusive tendering on a Transnet project – paying a fine of just 0.3% of its 2010 civil sector turnover – because former Competition Commission officials were in a hurry to reach a deal, it has emerged at a Competition Tribunal hearing.
The company was a previous offender and should have been fined accordingly. It had already paid an admission-of-guilt fine in terms of the fast-tracked investigation into collusion over the pricing of other construction projects, including 2010 World Cup stadiums. But the commission agreed to treat the Transnet project – the upgrading of the railway line between Sishen and Saldanha – as a separate issue but as part of the fast-track process.
Had this not happened, WBHO would have been expected to pay between 4% and 7% of its annual civil engineering turnover, instead of the R10.2-million it paid for collusion over the Transnet project.
WBHO's civil engineering division, in the year to June 2012, had revenue of R5.2-billion, which means that a maximum fine of R364-million could have been levied. It had paid a R311.3-million fine relating to the World Cup contracts.
The WBHO's co-accused, Murray & Roberts's Concor company, will not be as lucky. It did not reach a deal with the commission and, as a repeat offender, is facing higher penalties.
Murray & Roberts has already paid a fine of R309-million in terms of the fast-tracked settlement agreement and is currently negotiating with the commission over the Transnet project.
The tribunal's chair, Norman Manoim, said that the companies involved had not been transparent with the commission about the rail deal. The collusion came to light only after an appeal for leniency by a third company involved in the project, Lennings Rail Service, in 2009, which implicated both WBHO and Concor. Lennings received conditional leniency.
Tribunal members made it clear at the settlement hearing last week involving WBHO that they were not happy with what the commission told the hearing was an "unfortunate decision" by former employees.
Manoim said: "So the upshot of what you are saying – just so people can understand that – is that the penalty is more lenient than it might have been had it not been considered as part of the fast-track process."
Another tribunal member, Yasmin Carrim, said: "And, in fact, this would have been a second or third or fourth contravention of the [Competition] Act by WBHO, because, if it was treated outside the fast-track process, it would have been an additional contravention."
The fact that it was an additional contravention would have been taken into account by the tribunal.
Nelly Sekata, a senior legal counsel for the commission, said the deal with WBHO should not be seen as setting a precedent that firms could take advantage of. "This is a peculiar case and the commission is sensitive to the fact that a commitment was made [to WBHO] and in the circumstances … the commission could not renege on the agreement."
According to the commission's investigation, the tender to upgrade a section of the railway line carrying iron ore to Saldanha was won by WBHO and Concor, after colluding with Lennings at a meeting in 2006. It was agreed that Lennings would put in the highest bid so that one of the other two companies would win the overall bid. In exchange, Lennings would be subcontracted to lay the tracks for both companies.
But, after the tender process was completed and WBHO was selected as the preferred bidder, Transnet allegedly had budgetary problems and divided the project into north, south and central sections, with the latter assigned to its in-house construction division.
WBHO took over work on the southern part of the line and Concor was awarded the northern section, and Lennings was selected to lay the tracks for both companies.
A legal representative for WBHO said: "We would accept that the likely outcome of the north/south split was the result of a collusive process and hence we would accept the commission's findings in that respect."