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

Edna B. Shearer

Three companies that shaped portion of the former JSE-outlined civil engineering and geotechnical building group Esorfranki, later renamed Esor, have been collectively fined R15.7 million by the Competitiveness Tribunal.

The tribunal uncovered that Esor Ltd, Esor Africa (Pty) Ltd and Esor Design (Pty) Ltd contravened sections of the Competitiveness Act in that from at least 1999 to 2008 the firms have been component of a building cartel that concluded agreements among the themselves, fixed tender prices and allocated tenders/prospects and projects amongst by themselves, and engaged in bid-rigging as a result of protect pricing.

Cover pricing consists of generating the illusion of opposition by some corporations submitting non-competitive bids to help a fellow conspirator to get a tender, with the profitable bidder spending a “loser’s fee” to the business that offered the protect price.

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

Read: Esor submits design subsidiary to business enterprise rescue

Esor Building CEO Wessel van Zyl said on Friday that none of three entities have funds available for any lengthy legal motion.

“Although our erstwhile legal staff think[s] that there is no proof linking Esor to the record of contracts, we do not have the money indicates to charm,” he explained.

Van Zyl explained Esor Minimal and Esor Africa are nonetheless in company rescue although Esor Building successfully exited the small business rescue approach in March 2019.

“Following the ruling and the quantification of a penalty, the ultimate creditor legal responsibility can now be finalised and a dividend will be paid out to creditors to shut off the Esor Design enterprise rescue system,” he stated.

The circumstance is connected to a speedy-track settlement approach initiated by the Competitors Fee that resulted in 15 building organizations concluding consent agreements in 2013, in which they agreed to pay back penalties totalling R1.46 billion for collusion and bid-rigging.

Building sector collusion and bid-rigging settlement arrangement in issues
Competitors settlement: Only two design firms up to date on payments

The commission initiated the circumstance against Esor and the other respondents in March 2009 and referred it to the tribunal on March 2 2011.

Van Zyl explained Esor has always preserved, by then CEO Bernie Krone, who handed away in 2021, that Esor withdrew from the so-named reserve club in 2005 and did not take part in any additional tactics.

The tribunal identified the construction cartel formalised what was identified as the Piling Group or the Ebook Club, which was an arrangement to take care of price ranges and collusively tender for geotechnical initiatives, which includes piling, lateral aid, drilling, and grouting.

Some of the initiatives incorporated the Lusip Dam in Swaziland, the Sappi/Saiccor piling project, the Moses Mabhida Stadium piling challenge, the Braamhoek Dam Grouting challenge, the Coega Harbour diaphragm wall project, the Gautrain Speedy Rail Connection venture, the Olifantsfontein Procedure plant and the Lesotho Highlands H2o Task.

The case in opposition to Diabor Pty (Ltd), a single of the remaining respondents in the subject, was dismissed.

CompCom welcomes determination

The Levels of competition Fee on Friday welcomed the tribunal’s final decision to come across the Esor group of firms responsible of selling price-fixing, marketplace allocation and collusive bidding in building-associated markets for geotechnical providers.

Four other corporations have been originally cited as respondents but reached settlement agreements with the commission.

In conditions of these settlements:

  • Geomechanics CC and Geomech Africa (Pty) Ltd, which are element of the very same group, agreed to pay a whole good of about R1.65 million for collusive tendering on certain projects. The tribunal confirmed this settlement agreement in Oct 2016.
  • Rodio Geotechnics (Pty) Ltd agreed to spend a fantastic of R885 963 for collusive tendering on 9 assignments in a joint undertaking with Grinaker-LTA’s ground engineering division. This settlement was verified by the tribunal in April 2018.
  • Dura Soltanche Bachy agreed to pay back a fine of R988 589.08 for collusive tendering on 11 construction initiatives, with this settlement settlement confirmed by the tribunal in November 2015.

All these corporations were at first billed with Grinaker-LTA, the leniency applicant in the situation and then the Southern African design and engineering business of JSE-shown Aveng.

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

The fee alleged that from the 1970s to at least 2015 the 8 respondents colluded on several tenders.

It further more alleged that the organizations colluded via “formal arrangements” right up until 2005 and thereafter were being engaged in “ad hoc arrangements”.

In its pleadings, Esorfranki admitted to participating in the formal preparations but claimed these preparations stopped in 2005, extra than a few a long time in advance of the graduation of the commission’s investigation in 2009.

It argued the fee could thus not deliver the case towards it in phrases of a segment of the Competitiveness Act which, in advance of the 2018 amendments, specified that a prohibited follow criticism may possibly not be initiated additional than three decades after the apply has ceased.

The tribunal dismissed Esorfranki’s argument soon after finding the conduct pertaining to the projects allotted prior to September 24 2005 continued at the very least right until after June 2008.

Esorfranki admitted taking part in collusive perform on 1 Sappi/Saiccor project but the commission accused Esorfranki of involvement in numerous advert hoc arrangements.

The tribunal pointed out that the case towards Esorfranki revolves all-around the degree of its culpability and not whether it was culpable at all, introducing that the ad hoc collusion was aspect and parcel of the over-all agreement and not a little something new that started out following 2005.

“It may have withdrawn from the formal arrangements, but its collusive carry out that was the subject of the over-all arrangement less than the official preparations, ongoing at the very least until finally June 2008. Its perform just after 2005 could be characterised as a continuation of the over-all agreement albeit in a different form,” he tribunal stated.

“But even if the advert hoc preparations are not characterised as this sort of, we locate that Esorfranki’s collusive perform in the Sappi/Saiccor venture experienced not ceased 3 yrs prior to the commission’s initiation in April 2009,” it added.

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