The Competition Commission of South Africa v NPC-Cimpor (Proprietary) Limited and Others

The Competition Commission initiated a complaint in June 2008 investigating alleged cartel behaviour in the cement and cement extender industry. Second, third and fourth respondents (AfriSam, Lafarge SA, and PPC Limited) confessed to cartel conduct and entered into leniency/consent agreements between 2009-2012. In February 2015, the Commission referred a complaint against first respondent (NPC-Cimpor) alleging it was party to an agreement or concerted practice to indirectly fix cement prices and divide markets from before the Competition Act commenced (1 September 1999) until 2009. The alleged cartel had its origins in a lawful pre-1995 exempted cartel. In December 1995, after exemption withdrawal, cement producers agreed market shares at a SACPA meeting. In August 1998, representatives including Mr Strauss (first respondent) attended a Port Shepstone meeting resulting in an agreement on market share allocation, pricing parameters, and information exchange through Deloitte/C&CI. Until October 2002, first respondent was jointly owned by second, third and fourth respondents. In October 2002, Cimpor acquired all shares in first respondent, appointed new directors, though Mr Strauss remained as managing director. The Commission alleged first respondent continued to submit sales data to C&CI, maintained its allocated 10-12% market share, and remained bound by the cartel arrangements post-acquisition.

• Whether first respondent was party to an agreement or concerted practice prohibited under section 4(1)(b) of the Competition Act 89 of 1998
• Whether an agreement concluded at Port Shepstone in 1998 included first respondent as a party
• Whether first respondent's conduct after the Cimpor takeover in 2002 constituted continued participation in the cartel during the complaint period (2005-2009)
• The legal requirements for establishing cartel membership under section 4(1)(b) of the Competition Act
• The significance of information exchange and market share stability as evidence of cartel participation
• Whether a wholly-owned subsidiary can be held to have independently agreed to cartel conduct determined by its shareholders

The appeal was dismissed with costs, including costs of two counsel. The Competition Tribunal's December 2019 decision dismissing the complaint against first respondent was upheld.

The binding legal principles established are: 1. To prove cartel membership under section 4(1)(b), the Commission must demonstrate that the undertaking intended to contribute by its own conduct to the common objectives pursued by cartel participants, was aware of unlawful conduct planned or implemented by others in pursuit of those objectives, or could reasonably have foreseen it and was prepared to take the risk (applying Soliver principle). 2. An "agreement" for cartel purposes requires that parties reach consensus and express their joint intention to conduct themselves in the market in a specific way, binding them either contractually or by moral suasion or commercial interest (applying Netstar and Videx). 3. A wholly-owned subsidiary that lacks organizational autonomy and is controlled by shareholder-cartelists cannot be said to have independently "agreed" to cartel conduct where it simply implements decisions imposed by its shareholders who already possess all relevant information and strategic control as of right. 4. Participation in industry-wide information exchanges (such as submitting aggregated statistics to C&CI through Deloitte) is insufficient to prove cartel membership where: (a) the information is too generalized to monitor individual competitor conduct or enforce cartel arrangements; (b) the alleged cartelists conducted separate secret meetings exchanging detailed confidential information from which the respondent was excluded; and (c) the respondent had no open communication lines with competitors to coordinate conduct. 5. Maintenance of a relatively stable market share does not prove cartel participation where: (a) there was no agreement allocating that specific market share to the party; (b) the stability can be explained by legitimate business constraints (such as production capacity limitations); and (c) the party's post-acquisition conduct (changing incentive structures, capacity expansion, strategic repositioning) is inconsistent with cartel membership. 6. Even in cartel cases involving the most pernicious anti-competitive conduct, competition authorities must discharge their evidential burden and courts must apply established rule of law principles - the seriousness of cartel conduct does not permit relaxation of evidentiary standards or reliance on speculation.

The Court made several significant non-binding observations: 1. Davis JP noted that the Commission's argument regarding a "premium" paid by Cimpor for first respondent's shares to secure non-competition from sellers was not properly pleaded, was based on an anonymous internal memorandum (Exhibit 4) of uncertain provenance dated two years before the actual sale, and lacked expert valuation evidence for the year of sale (2002). The Court characterized this as an "afterthought" that should have been properly pleaded with supporting evidence. 2. The Court observed that the Commission had access to witnesses from second and third respondents (such as Ms Saizedes) who could have provided evidence regarding supply agreements between first respondent and its competitors, but failed to call them. The Court noted that while it can draw inferences from proven facts, such inferences must be the more plausible conclusion among possibilities, and it would be "dangerous precedent" to engage in speculation favoring the Commission simply because of the seriousness of cartel conduct. 3. The Court noted with apparent concern the timeline: seven years elapsed between initiation of the complaint (June 2008) and referral to the Tribunal (February 2015), and three years after the final consent agreement with third respondent (March 2012). While not decisive, this delay appeared to inform the Court's overall assessment. 4. Davis JP emphasized that the post-acquisition conduct of first respondent - particularly commissioning "the first new kiln in South Africa in over 20 years" and changing employee incentive structures - demonstrated "a stark contrast in strategic direction" and "a clear break from its conduct as a passive controlled subsidiary." 5. The Court suggested that if the Port Shepstone agreement could be shown not to include first respondent (as the Tribunal found), this conclusion "might not be necessary" - implying some doubt about whether first respondent was actually party to that agreement, though the Court assumed it arguendo for purposes of the appeal. 6. The judgment contains implicit criticism of the Commission's case preparation, noting absence of evidence on critical issues, failure to call available witnesses, and reliance on arguments not properly pleaded or supported by evidence presented at trial.

This case is significant in South African competition law as it clarifies the evidentiary burden required to establish cartel membership under section 4(1)(b) of the Competition Act. It establishes important principles regarding: (1) the legal status of wholly-owned subsidiaries in cartel arrangements controlled by shareholder-cartelists; (2) what conduct is sufficient to prove continued cartel participation after a change in ownership/control; (3) the evidential weight to be given to information exchanges and market share stability as proof of cartel conduct; and (4) the application of European competition law principles (particularly the Soliver test) requiring proof that an undertaking intended to contribute to cartel objectives and was aware of the unlawful conduct or reasonably could foresee it. The judgment balances the need for strict enforcement against cartel conduct with adherence to fundamental evidentiary and rule of law principles, confirming that even in cartel cases, competition authorities must discharge their burden of proof with adequate evidence and cannot rely on speculation or inference alone. It demonstrates that participation in information exchanges and stable market shares, without more, are insufficient to prove cartel membership, particularly where legitimate business explanations exist and the party was excluded from the core cartel communications.