ArcelorMittal agrees to pay R1.5bn fine in collusion case
Steel producer, ArcelorMittal South Africa, on Monday agreed to pay a R1.5 billion fine to the Competition Commission after the company admitted to steel and scrap metal cartels after a long-standing investigation of price collusion in the industry.
ArcelorMittal was ordered to pay an administrative penalty of R1.5 billion, payable over 5 years, in instalments of no less than R300 million per annum, starting in 2017.
The matter dates back to a 2008 investigation when the Competition Commission raided ArcelorMittal's offices, as well as that of other steel producers, including Highveld Steel and Vanadium Corporation (Highveld), the South African Iron and Steel Institute, and the Cape Town Iron and Steel Works (Cisco).
Of the six matters pending before the Commission, ArcelorMittal admitted guilt in the long-running steel matter which related to allegations of fixing prices, allocating customers and sharing commercially sensitive information.
The company also admitted guilt in the scrap metal matter relating to allegations of price fixing by the company as a consumer of scrap.
ArcelorMittal, however, made no admission regarding the excessive pricing complaint and the Commission has made no finding in this regard.
"We are pleased to announce that all outstanding matters have now been addressed and a settlement has been reached, finalising all pending matters against the company," ArcelorMittal said in a statement.
"Subject to the final order being granted, this will bring an end to these legal matters, which have been pending against the company for some time.
ArcelorMittal also agreed that it shall, for a period of five years, not be permitted to earn an EBIT (earnings before interest and tax) margin percentage greater than 10 percent relating to flat steel products sold in South Africa over a 12 months period linked to its financial year.
But the company would be permitted to exceed the 10 permitted cap up to a maximum of 15 percent in certain defined circumstances.
As part of the settlement agreement, ArcelorMittal committed R4.64 billion in capital expenditure over five years.
In a statement, the Competition Commission said it had reached a settlement agreement with ArcelorMittal, finalising all pending investigations and prosecutions against it.
"In terms of the agreement, ArcelorMittal admits having been involved in the long steel and scrap metal cartels, and agrees to pay an administrative penalty of R1.5 billion," Commissioner Tembinkosi Bonakele said.
"Furthermore, ArcelorMittal has agreed to remedies relating to complaints against its pricing conduct without admitting that its pricing conduct constituted a contravention of the Competition Act."
Bonakele said the Commission's penalty would send out a strong message against collusion and cartels in the industry as they were working to protect South African consumers against dominant firms, particularly on key industrial products.
"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." - ANA