Esor firms fined R15.7m for price-fixing and bid-rigging

Three firms that fashioned a part of the previous JSE-listed civil engineering and geotechnical building group Esorfranki, later renamed Esor, have been collectively fined R15.7 million by the Competition Tribunal.

The tribunal discovered that Esor Ltd, Esor Africa (Pty) Ltd and Esor Construction (Pty) Ltd contravened sections of the Competition Act in that from not less than 1999 to 2008 the businesses have been a part of a building cartel that concluded agreements amongst themselves, fastened tender costs and allotted tenders/prospects and initiatives amongst themselves, and engaged in bid-rigging via cowl pricing.

Cover pricing entails creating the phantasm of competitors by some corporations submitting non-competitive bids to allow a fellow conspirator to win a young, with the profitable bidder paying a “loser’s fee” to the agency that supplied the quilt worth.

Esor, which filed for enterprise rescue in August 2018, had its itemizing on the JSE terminated in June 2020.

Read: Esor submits building subsidiary to enterprise rescue

Esor Construction CEO Wessel van Zyl mentioned on Friday that none of three entities have funds out there for any prolonged authorized motion.

“Although our erstwhile legal team believe[s] that there is no evidence linking Esor to the list of contracts, we do not have the financial means to appeal,” he mentioned.

Van Zyl mentioned Esor Limited and Esor Africa are nonetheless in enterprise rescue whereas Esor Construction efficiently exited the enterprise rescue course of in March 2019.

“Following the ruling and the quantification of a penalty, the final creditor liability can now be finalised and a dividend will be paid to creditors to close off the Esor Construction business rescue process,” he mentioned.

The case is linked to a fast-track settlement course of initiated by the Competition Commission that resulted in 15 building firms concluding consent agreements in 2013, through which they agreed to pay penalties totalling R1.46 billion for collusion and bid-rigging.

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The fee initiated the case in opposition to Esor and the opposite respondents in March 2009 and referred it to the tribunal on March 2 2011.

Van Zyl mentioned Esor has all the time maintained, via then CEO Bernie Krone, who handed away in 2021, that Esor withdrew from the so-called e book membership in 2005 and didn’t take part in any additional practices.

The tribunal discovered the development cartel formalised what was often called the Piling Group or the Book Club, which was an association to repair costs and collusively tender for geotechnical initiatives, together with piling, lateral assist, drilling, and grouting.

Some of the initiatives included the Lusip Dam in Swaziland, the Sappi/Saiccor piling undertaking, the Moses Mabhida Stadium piling undertaking, the Braamhoek Dam Grouting undertaking, the Coega Harbour diaphragm wall undertaking, the Gautrain Rapid Rail Link undertaking, the Olifantsfontein Treatment plant and the Lesotho Highlands Water Project.

The case in opposition to Diabor Pty (Ltd), one of many remaining respondents within the matter, was dismissed.

CompCom welcomes resolution

The Competition Commission on Friday welcomed the tribunal’s resolution to seek out the Esor group of firms responsible of price-fixing, market allocation and collusive bidding in construction-related markets for geotechnical providers.

Four different firms have been initially cited as respondents however reached settlement agreements with the fee.

In phrases of those settlements:

  • Geomechanics CC and Geomech Africa (Pty) Ltd, that are a part of the identical group, agreed to pay a complete positive of about R1.65 million for collusive tendering on sure initiatives. The tribunal confirmed this settlement settlement in October 2016.
  • Rodio Geotechnics (Pty) Ltd agreed to pay a positive of R885 963 for collusive tendering on 9 initiatives in a three way partnership with Grinaker-LTA’s floor engineering division. This settlement was confirmed by the tribunal in April 2018.
  • Dura Soltanche Bachy agreed to pay a positive of R988 589.08 for collusive tendering on 11 building initiatives, with this settlement settlement confirmed by the tribunal in November 2015.

All these corporations have been initially charged with Grinaker-LTA, the leniency applicant within the case after which the Southern African building and engineering enterprise of JSE-listed Aveng.

Grinaker-LTA was subsequently offered in 2019 to the black-owned Laula Consortium.

The fee alleged that from the Seventies to not less than 2015 the eight respondents colluded on numerous tenders.

It additional alleged that the businesses colluded via “formal arrangements” till 2005 and thereafter have been engaged in “ad hoc arrangements”.

In its pleadings, Esorfranki admitted to taking part within the formal preparations however claimed these preparations stopped in 2005, greater than three years earlier than the graduation of the fee’s investigation in 2009.

It argued the fee might subsequently not convey the case in opposition to it by way of a bit of the Competition Act which, earlier than the 2018 amendments, specified {that a} prohibited apply grievance is probably not initiated greater than three years after the apply has ceased.

The tribunal dismissed Esorfranki’s argument after discovering the conduct pertaining to the initiatives allotted previous to September 24 2005 continued not less than till after June 2008.

Esorfranki admitted taking part in collusive conduct on one Sappi/Saiccor undertaking however the fee accused Esorfranki of involvement in a number of advert hoc preparations.

The tribunal famous that the case in opposition to Esorfranki revolves across the diploma of its culpability and never whether or not it was culpable in any respect, including that the advert hoc collusion was half and parcel of the general settlement and never one thing new that began after 2005.

“It might have withdrawn from the formal arrangements, but its collusive conduct that was the subject of the overall agreement under the formal arrangements, continued at least until June 2008. Its conduct after 2005 could be characterised as a continuation of the overall agreement albeit in a different form,” he tribunal mentioned.

“But even if the ad hoc arrangements are not characterised as such, we find that Esorfranki’s collusive conduct in the Sappi/Saiccor project had not ceased three years prior to the commission’s initiation in April 2009,” it added.

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