Construction firms settle collusive tendering cases with R1.5 billion in penalties

The Competition Commission (“Commission”) has reached settlement with 15 construction firms for collusive tendering, in contravention of section 4(1) (b) of the Competition Act. The firms have agreed to penalties collectively totalling R1.46bn.

The settlements were reached in terms of the Construction Fast Track Settlement Process, launched in February 2011. The fast-track process incentivised firms to make full and truthful disclosure of bid rigging in return for penalties lower than what the Commission would seek if it prosecuted these cases.

Twenty one firms responded to the Commission’s offer of a fast-track settlement. While over 300 instances of bid rigging were revealed through this initiative, the settlements were reached only with respect to projects that were concluded after September 2006, before which transgressions are beyond the prosecutorial reach of the Competition Act.

The breakdown of penalties per firm is as follows:

Firm Settlement amount (ZAR)

The responses to the Construction Fast Track Settlement offer revealed various ways in which firms historically determined, maintained and monitored collusive agreements. These included meetings to divide markets and agree on margins. Different combinations of firms coordinated tenders over different projects. Firms colluded to create the illusion of competition by submitting sham tenders (“cover pricing”) to enable a fellow conspirator to win a tender. In other instances, firms agreed that whoever won a tender would pay the losing bidders a “loser’s fee” to cover their costs of bidding. Sub-contracting was also used to compensate losing bidders.