Antitrust Law Daily Wrap Up, ANTITRUST NEWS: ArcelorMittal settles South Africa price fixing charges for $110M, (Aug 22, 2016)

By Greg Hammond, J.D.

ArcelorMittal South Africa Ltd. (AMSA) has agreed to pay a reportedly record fine of R1.5 billion—approximately $110.2 million—to settle South Africa Competition Commission charges that AMSA conspired to fix the prices of long steel and scrap metal, the Competition Commission announced today.

The Competition Commission began its investigation in April 2008 into long and flat steel producers in South Africa. It found that AMSA and other competitors colluded by fixing prices and discounts, allocating customers, and sharing commercially sensitive information through the South African Iron and Steel Institute (SAISI) and the South African Reinforced Concrete Engineers’ Association.

In particular, the Competition Commission found that AMSA: (1) conspired to fix the purchase price of scrap metal by negotiating and agreeing to a standard formula that was used to determine the purchase price of scrap metal and collaborating and acting in tandem with competitors with an upstream cartel of scrap merchants; (2) reached an understanding with competitor Highveld Steel and Vanadium Corp. Ltd., in which Highveld would follow AMSA’s lead on pricing in the flat steel market, and the two companies used SAISI to exchange commercially sensitive information, such as sales volumes, constituting price fixing and market allocation in contravention of the South Africa Competition Act; and (3) engaged in price discrimination by differentiating between its customers in terms of discounts offered for low carbon wire rod. The Competition Commission also claimed that AMSA charged excessive prices for its flat steel products, but has not made a finding on this issue.

AMSA admitted to colluding with competitors to fix prices and discounts, allocating customers, and sharing commercially sensitive information in the market for the manufacture of long steel products, and that it fixed the purchase price of scrap metal. However, with regard to the flat steel complaint, AMSA admitted the conduct complained of, but did not admit that the conduct violated the Competition Act. In settling all of the claims, AMSA has agreed to pay an administrative penalty of R1.5 billion in five annual installments. AMSA has also agreed to not be permitted to earn an EBIT (earnings before interest and tax) margin percentage greater than 10 percent with regard to flat steel products sold in South Africa for a one year period. Lastly, AMSA committed a R4.64 billion capital expenditure over a five year period.

"The Commission is delighted to bring an end to these longstanding proceedings. The penalty sends a strong message of deterrence and is an important milestone in the Commission’s enforcement against cartels," stated Commissioner Tembinkosi Bonakele. "In addition, the pricing remedy reflects our desire to protect South African consumers against dominant firms, particularly on key industrial products. This remedy is a safeguard in the event that AMSA were to revert to the historical prices that the Commission regards as excessive."

The Competition Commission has filed an application with the Competition Tribunal for confirmation of the settlement agreement.

Companies: ArcelorMittal South Africa Ltd.

News: Antitrust