Cross Fire Management (Pty) Ltd v The Competition Commission of South Africa

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judge: Rogers JA and Fisher AJA and Unterhalter AJA
• Judgment Date: 10 February 2022
• Court: Competition Appeal Court
• Hearing Date: 10 December 2021
• Docket Number: 192/CACFeb21

Rogers JA (Fisher and Unterhalter AJJA concurring):

Introduction:

[1]

The appellant, Cross Fire Management (Pty) Ltd (Cross Fire), was a respondent in complaint proceedings brought by the present respondent, the Competition Commission of South Africa (Commission), in the Competition Tribunal (Tribunal) against seven firms in the business of supplying and installing fire control and protection systems. The Commission alleged that five of them had engaged, with others, in prohibited conduct in the form of collusive tendering in violation of section 4(1)(b) of the Competition Act 89 of 1998 (Act). These five firms were Afrion Property Services CC (Afrion), Belfa Fire (Pty) Ltd (Belfa), Cross Fire, Fire Protection Systems (Pty) Ltd (FPS) and Tshwane Sprinklers CC (Tshwane Sprinklers). The Commission had a separate and discrete complaint of market division against the other two respondents, Fireco (Pty) Ltd (Fireco) and KRS Fire (Pty) Ltd (KRS, formerly Fireco Gauteng (Pty) Ltd).

[2]

Before the Tribunal hearing began, settlements were reached between the Commission and Afrion, FPS and KRS. Shortly after the start of the Tribunal proceedings, Fireco reached a settlement with the Commission. The proceedings then continued against Belfa, Cross Fire and Tshwane Sprinklers. Belfa was only represented at the hearing on the first three days, apparently because it ran out of money.

[3]

The Tribunal dismissed the complaint against Tshwane Sprinklers but found the case proved against Belfa and Cross Fire. Administrative penalties of R10,100,126 and

2022 JDR 1986 p3

Rogers JA (Fisher and Unterhalter AJJA concurring)

R12,894,000 were imposed on Belfa and Cross Fire respectively. Cross Fire appeals the Tribunal's finding that it contravened section 4(1)(b) and the penalty.

[4]

It is not now in dispute that for some years Cross Fire was party to the prohibited conduct of which the Commission accused the respondent firms. On the merits, the important questions are whether Cross Fire's prohibited conduct ceased before the Commission initiated the complaint and, if so, when its conduct ceased. This is relevant because section 67(1) of the Act, as it read at all times material to this case, provided: "A complaint in respect of a prohibited practice may not be initiated more than three years after the practice has ceased." The complaint was initiated on 13 March 2015, so the question is whether Cross Fire's prohibited conduct ceased before 13 March 2012. The Tribunal held not.

[5]

If this Court finds that Cross Fire's prohibited conduct ceased before 13 March 2012, the Commission asks us to condone its non-compliance with the time-limit imposed by section 67(1). That the Tribunal may in principle condone non-compliance with section 67(1) was settled by the Constitutional Court's judgment in Pickfords, [1] delivered on 24 June 2020. The Commission did not bring a condonation application in the Tribunal but has brought such an application in this Court. If we reach the issue of condonation, the questions which arise are whether this Court – as distinct from the Tribunal – has jurisdiction to grant condonation and, if so, whether it should do so; and, if we find that this Court lacks jurisdiction to grant condonation, whether we can and should remit the case to the Tribunal to deal with condonation.

[6]

The Act came into force on 1 September 1999. The prohibited conduct started before that date and continued afterwards. Although Cross Fire pleaded that the incidents of collusive tendering occurred ad hoc, it does not now contest the Tribunal's finding that there was an overarching understanding in terms of which the collusive tendering took place, even though collusive tenders made up a relatively small part of

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Rogers JA (Fisher and Unterhalter AJJA concurring)

tenders in which Cross Fire participated (the collusive tenders specified by the Commission comprised on average fewer than 2% per annum of the tenders in which Cross Fire participated). The understanding was that from time to time the firms would favourably consider requests made by one of them to provide the requesting firm with cover bids, i.e. bids at higher prices than those which the requesting firm intended to submit.

The evidence:

[7]

In its complaint referral, the Commission attached a cumulative schedule setting out all the projects alleged to have been the subject of collusive tendering as well as individual schedules listing the projects in which each respondent firm was alleged to have engaged in prohibited conduct. Cross Fire was alleged to have participated in 33 collusive tenders over the period May 1996 to August 2015. Leaving aside the six instances predating the commencement of the Act, Cross Fire stood accused of prohibited conduct in 27 tenders. Cross Fire admitted collusion in 14 of these projects. The most recent of the admitted instances occurred in July 2009. In view of the finding of an overarching understanding, these 14 tenders were instances where Cross Fire gave effect to the understanding either by requesting or providing cover bids.

[8]

The Commission adduced no direct evidence against Cross Fire. There were some incriminating documents. More importantly, in its answering affidavits and witness statements, Cross Fire admitted 14 instances of collusion. This position was maintained by its witnesses, Ms Catherine Stewart, Mr Anton Kriel and Mr Hermand Rampursat. With one possible exception, the Tribunal made no factual findings against Cross Fire in relation to projects where Cross Fire denied collusion. The important question, therefore, is whether Cross Fire's absence from collusive tendering after about mid-2009 until the Commission initiated the complaint in March 2015 was because – as Cross Fire says – it had withdrawn from the overarching understanding, or whether it just so happened that in this period of just under six years it neither requested nor gave cover bids to firms with whom it was still in a collusive relationship.

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Rogers JA (Fisher and Unterhalter AJJA concurring)

The early years:

[9]

The only direct evidence to explain Cross Fire's absence from collusive tendering after mid-2009 came from the Cross Fire witnesses. Ms Stewart started working in this industry at the age of 21, first for Belfa. In 1994 she moved to Fire Control Systems (Pty) Ltd (FCS), a firm which was involved in the collusion but which went into liquidation in early 2015 and was not cited as a respondent. She joined Cross Fire in 1997. In 2000 she moved from design to sales, and it was at this time that she was exposed to the long-standing practice of cover pricing. The company was headed by Messrs John Cross and David Dalgleish. The industry was dominated by men who had known each other for many years. According to Ms Stewart, she was frustrated by the collusion. Sometimes her hard work in preparing tenders came to nought when it emerged that Mr Cross had agreed the outcome with a competitor.

[10]

Mr Dalglish sold out to Mr Cross in 2003. According to Ms Stewart, Mr Dalglish had been a leading protagonist of collusive conduct. Ms Stewart and Mr Kriel were promoted to more senior positions, allowing them to exert some, though still slight, influence. In December 2004 Ms Stewart acquired a modest shareholding in the company. In February/March 2007 Mr Kriel became the company's sales director, and Ms Stewart moved to the position of projects and operations director. Mr Cross was still the managing director. She and Mr Kriel had quite heated arguments with Mr Cross about cover pricing. Mr Cross did not share their confidence that the company could conduct itself legitimately and still succeed.

The One Monte project:

[11]

According to Ms Stewart and Mr Kriel, the first project where their resistance to collusive conduct came significantly to the fore was the One Monte Project in Johannesburg in late 2008/early 2009. One Monte was not one of the collusive projects listed in the Commission's complaint referral. The fire protection tender was managed for the client by Trevor Williams Consulting Engineers (TWCE). Only Cross Fire,

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Rogers JA (Fisher and Unterhalter AJJA concurring)

Belfa and FCS were invited to tender. A collusive arrangement was reached for Belfa to win the tender, Cross Fire being represented in this deal by Mr Cross. It turned out, however, that Mr Cross was out of the country when tenders were to be submitted. According to Ms Stewart and Mr Kriel, they took the opportunity to extricate Cross Fire from the collusion. This they did by not submitting a tender at all. Ms Stewart acknowledged that another reason for not participating in the tender was that the cover prices Belfa was asking Cross Fire to submit were "crazy".

[12]

Ms Stewart testified that it was most unusual for an invited firm not to submit a tender. If the firm did not want the work (for example, because it was technically complicated or the firm was too busy or did not like the principal contractor), the firm would usually prefer still to submit a high (non-competitive) bid in order to stay on the consultant's invitation list. If a firm decided not to tender at all, it would give an explanation. According to Mr Kriel, he gave such explanation – he told Mr Williams Cross Fire was too busy.

[13]

Nevertheless, the absence of a tender from Cross Fire elicited a call to Ms Stewart from Mr John Goring, manager of the industry association, Automatic Sprinkler Inspection Bureau (ASIB). [2] She told him that they did not want to be part of the industry collusion. She surmised that this would get back to TWCE and to the industry, and she later concluded that her surmise had been right. In its tender report dated 14 February 2009, TWCE noted that Cross Fire had not submitted a tender, citing a large workload as the "official reason". Subsequent...