ArcelorMittal SA steels itself for R1.5bn price fixing penalty

All outstanding matters regarding the settlement agreement between ArcelorMittal SA and the Competition Commission have now been addressed and ArcelorMittal will pay an administrative penalty of R1.5bn for price fixing.

The penalty is payable over five years as from 2017. The instalments are to be no less than R300-million per annum.

ArcelorMittal has also committed to capital investment of at least R4.6-billion over the five-year period subject to it being affordable and feasible in the light of the financial circumstances.

The fine comes after ArcelorMittal admitted guilt to two of the six matters pending before the commission. The company admitted guilt to “the long steel matter”, relating to allegations of fixing prices, allocating customers and sharing commercially sensitive information, and as a consumer of scrap to a scrap metal allegation of price fixing.

AcerlorMittal said on Monday in the light of the vulnerable state of the steel industry and the position of the company, no interest will be levied on the administrative penalty for the first 18 months from the date on which the settlement agreement is made an order of the tribunal. Thereafter interest will be levied on the remaining outstanding balance at the prevailing interest rate prescribed by the minister of finance – currently 10.5%.

As communicated by the commission, an application has been filed with the Competition Tribunal for confirmation of this settlement agreement as an order of the tribunal, said ArcelorMittal.

“Shareholders should, therefore, note that the settlement agreement is subject to the approval of the tribunal. Subject to the final order being granted, this will bring an end to these legal matters, which have been pending against the company for some time.”

ArcelorMittal noted that it has made no admission regarding the excessive pricing complaint and the commission has made no finding in this regard.

“Notwithstanding, in the light of the previous concerns regarding pricing and the company’s commitment to work with the government and all stakeholders to contribute to the growth of South Africa’s economy, the company has agreed to a pricing remedy for local flat steel products,” said ArcelorMittal.

In terms thereof the company will, for a period of five years, not be permitted to earn an “earnings before interest and tax” margin percentage greater than 10% relating to flat steel products sold in South Africa over a 12-month period as measured over the company’s financial year. However, ArcelorMittal will be permitted to exceed the 10% cap up to a maximum of 15% in certain defined circumstances.

“The agreement makes provision for monitoring by the commission, which will allow for ongoing engagement and the sharing of information, as well as the opportunity to engage if there is a significant change in the economic, financial and market circumstances,” said ArcelorMittal.

“The company has been proactive and various interventions have already been implemented within the company to ensure that there is more vigilance to guard against such conduct happening again.”

This includes an enhanced training and compliance programme as well as ongoing enhanced communication.

The shares were changing hands 1.42% lower on R7.61 just after 12pm. – Fin24

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