Cartel case comes down to the wire

After years of delays it seemed that the wire cartel, which is alleged to have operated for almost a decade, would finally answer charges that it engaged in collusive behaviour. 

But it was not to be. The matter was postponed, because Allens Meshco Group (AMG), which is linked to 10 of the 12 accused, has appealed to the Competition Appeal Court to overturn the Competition Tribunal decision to proceed with the hearing despite a pending court ruling. 

AMG said it was waiting for the Pretoria high court to decide whether its application for leniency should be reconsidered by the Competition Commission. 

It has already lost a case in which the court was asked to have the commission’s corporate leniency policy declared “unlawful”. 

The wire cartel case provides insight into why it can take so long for competition cases to be concluded. 

The Competition Commission is being watched with interest by law firms that specialise in competition issues. The commission recently launched its first two market probes and is investigating the conduct of a number of sectors, making use of its search-and-seizure powers to gather information seen as relevant to its investigations. 

The case involving the wire cartel has been delayed by a court case and appeals, which ultimately went in the commission’s favour. 

The matter dates back to a January 2007 case against six wire manufacturers that were alleged to have fixed prices for galvanised wire, nails and other wire products.

This case was later consolidated with another in 2009, to see a total of 12 wire companies facing anticompetitive charges.

The commission’s founding affidavits before the Competition Tribunal detail meetings and emails in which members of the cartel allegedly fixed prices and discounts, divided up markets and tendered collusively.

They also contain admissions of guilt from executives of Consolidated Wire Industries (CWI), who are helping the commission with the prosecution of the cartel in return for leniency. The wire products the alleged cartel members manufacture are used in the mining, agriculture and hardware markets. The members also manufacture products for protecting electric cables and in the pulp and welding industries.

Naturally, any cartel margin on inputs for these key sectors of the economy could have cost the country financially.

The case against the 12 wire manufacturers focuses on how smaller players in the industry have arranged themselves into a coalition.

The case is linked to the commission’s case against South Africa’s steel manufacturers, which were alleged to have run a cartel for 10 years. Steel firm Scaw Metals and its subsidiary, CWI, triggered the two cases by coming forward to blow the whistle on the cartels in exchange for corporate leniency, which will see them avoid prosecution.

Central to the commission’s case against the wire manufacturers is the fact that 10 of the 12 accused have Rick Allen as either a director or a “substantial shareholder”.

The commission’s referral affidavit seems to suggest that Allen may be a ringleader of the cartel. It details a number of alleged meetings held by the wire manufacturers, including some at which Allen is said to have represented a number of the firms.

CWI chief executive Johannes Botha has given the commission a witness statement that details the alleged collusion in the wire cartel.

“Following the meetings, it was understood that Allen would report back to the other members of AMG who may not have been present at the relevant meetings,” reads Botha’s witness statement.

However, Allen has repeatedly denied this to the Mail & Guardian, stating that he is a director of AMG, made up of 10 of the wire manufacturers listed in the affidavit. AMG was set up to establish buying power on steel and improve distribution because, he claimed, the industry was being run by the steel manufacturers.

Allen said it was the “vertically integrated” steel manufacturers that were being anticompetitive.

One of the Allens Meshco companies, Agri Wire, lodged an appeal in 2010 in the Pretoria high court to have the commission’s corporate leniency policy declared “unlawful”, which could have scuppered the commission’s cases against the wire and steel companies.

Agri Wire lost the case and subsequent appeals. In 2011 the commission’s case against a wire-mesh cartel shone more of a spotlight on Allen. Although none of the Allens Meshco companies was implicated, Allen’s name was mentioned numerous times during the tribunal hearing.

Vulcania Reinforcing’s director, Sean Greve, claimed in his witness statement that Allen’s involvement was at the senior management level of the cartel.

Greve stated that the proposals discussed at informal meetings were referred for confirmation and approval to senior managers of the respective companies, including Allen. “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 Greve. “However, no decisions were made without the approval of Rick Allen.”

Asking for a postponement at a recent hearing, advocate Brenton Geach, representing 10 Allens Meshco companies, said the matter could not proceed until the high court had ruled on request for an order compelling the Competition Commission to reconsider its application for lenience.  

The commission had rejected Allens Meshco’s leniency application, having opted instead to grant leniency to Consolidated Wire Industries in 2008. Geach told the tribunal that not postponing the hearing would be “tantamount to saying to the high court: ‘Your judgment is irrelevant.’”

Representing the commission, advocate Hamilton Maenetje argued that the Allens Mescho Group had first attempted to have the commission’s leniency policy declared illegal in the courts and then, when the policy was ruled valid, it had wanted to benefit from the leniency regime and confess its involvement in the cartel.

When another alleged cartel member beat it to the post, the group denied any involvement in the cartel but challenged the fact that it didn’t obtain leniency from the commission in the high court, Maenetje said. He called Allens Meshco’s legal antics an “abuse of process”. 

Competition Tribunal chair Anton Roskam seemed to agree. “You can’t be standing in both camps,” he said to Geach. 

The commission’s founding affidavit in the case presents detailed accounts of meetings. These were mostly held in Gauteng and the Western Cape, at OR Tambo International Airport, a City Lodge hotel or the offices of several of the members.

Nathan Friedman, Dawid van der Bank, Pikkie Coetzee, Martin Friedman and Egbie Compion rep-resented Cape Gate over the years, and Rick Allen and Bill van den Berg represented Allens Meshco.

Hendok was represented by Hendrik de Kok and Freddie de Kok, Wire Force by Gary Campbell and Keith Elridge, Agri Wire by André Serdyn, Cape Wire by Rob Cullum, Forest Wire by Anthony Harris, and John Joubert, Bushy Botha and Ronnie Kallan represented CWI.

New investigations by the Competition Commission are underway. It has made use of its new powers to conduct search-and-seizure operations as part of an investigation into the market for supplying edible oils and margarines, as well as the market for the manufacture and supply of automotive components provided to original equipment manufacturers, and the market for input materials in the manufacture of blended household detergents, cosmetics and toiletries.

Orderly puts his Voet in it

The following occurred at the circuit court in Durban many years ago. The learned judge called for authorities on Roman-Dutch law and requested the registrar to send for writings by Voet, Van der Linden and Maasdorp.  
The registrar whispered to the court orderly, repeating the names of the authorities just mentioned. In due course the orderly shouted out the three names three times outside the court: “Voet, Van der Linden, Maasdorp!” 

When no one responded to the shouting, the orderly returned to the court, saying: “In default, my lord,” much to the amusement of the Bench and Bar. 

Edited extract from From Bench to Bench by FW Ahrens (1948), quoted in Law, Life and Laughter by Professor Ellison Kahn (Juta & Co Ltd, 1991)

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Lloyd Gedye
Lloyd Gedye
Lloyd Gedye is a freelance journalist and one of the founders of The Con.

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