June 29, 2014
COMPETITION commissioner Tembinkosi Bonakele is adamant that excessive pricing by Sasol will be dealt with either through competition law or government policy. And Sasol’s attempts to quash a hefty fine will be fought.
Bonakele was commenting on Friday after it emerged that Sasol planned to appeal against the Competition Tribunal’s ruling that it may no longer charge the equivalent of import-parity prices for propylene and polypropylene, ingredients of plastic. It also fined Sasol R543-million. Sasol is relying in its defence on a previous case against Mittal.
“These are different times,” said Bonakele. “I can promise you this matter is not going to disappear. Sasol is out of touch if it believes it can win the matter on the basis of technical legal arguments. This issue has to be resolved either through competition law or through government policy.”
He said the commission would do everything to defend and strengthen the tribunal’s ruling, including cross-appealing the R543-million penalty. “We think it should be bigger.”
Bonakele acknowledged fears that the appeal process could delay action to address harm done to the economy through excessive pricing by companies such as Sasol.
“The issue in this case is fundamental to the development of our economy. We are dealing with resources that should be available to promote that development. The government plays an important role in the country’s industrialisation, and I believe it will be very interested in the progress of this case,” said Bonakele.
He was emphatic that the case would not “get lost in the Appeal Court process. The solution to this situation lies not just in the courts but also in government’s policy response”.
One analyst said that if the appeal process dragged on it could indicate competition law was not effective in tackling anticompetitive threats.
“It is likely that government will then look to other more direct measures such as breaking up large powerful companies like Sasol, which as privatised monopolies are able to extract attractive rents for their shareholders at the expense of the economy.”
An analyst said that the Mineral and Petroleum Development Act could be used to rein Sasol in.
The tribunal’s ruling on Sasol is its second bid to address excessive pricing, which is frequently equivalent to import-parity pricing.
In March 2007, it ruled, in a case brought by Harmony Gold, that Mittal was abusing its dominance by charging excessive prices for its flat primary steel.
Mittal appealed against the ruling, and the Competition Appeal Court (CAC) sent the case back to the tribunal for further consideration. But Harmony and Mittal came to a private arrangement, which meant there was no resolution of the excessive pricing charge.
In its appeal notice — at 70 pages said to be the longest received by the tribunal — Sasol relies heavily on the CAC findings. It detailed a list of aspects where Sasol says the tribunal erred in its ruling.
Sasol said the commission did not prove its case in many areas such as the claim that cutting the polypropylene price would increase competition.
Ben Turok, the former ANC MP who is leading a high-profile committee tasked with identifying the “blockages” to economic development, said the committee would be looking closely at the Sasol case.
“Our committee, consisting of government and private-sector representation, has been looking at the value chain in mining and minerals for two years,” said Turok.
(By Ann Crotty)