Yesterday the Competition Commission issued a media release announcing that it has struck a deal with ArcelorMittal settling all the outstanding investigations and claims against it for a whopping fine of R1.5 billion payable in R300 million annual instalments for the next 5 years. In addition, AMSA has committed to capping its earnings before interest and tax on flat steel to 10% (a tolerance of up to 15% is apparently permitted in certain circumstances) and to spending R4.64 billion in capital expenditure for the next 5 years.
In addition to the enormous numbers, what is particularly interesting is that AMSA only admits contravening the Competition Act in relation to the long steel and scrap steel cartels. Those admissions involve colluding with CISCO, Scaw and Cape Gate by fixing prices and discounts, allocating customers and sharing commercially sensitive information in the long steel manufacturing market and fixing the purchase price of scrap metal in a cartel that also involved Columbus Steel, Cape Gate and Scaw. While admitting that it exchanged sales volume and other competitively sensitive information with Highveld Steel through an industry association and that it had an informal understanding that Highveld would follow its lead in terms of pricing of flat steel, AMSA doesn't admit that this conduct was price-fixing or market division as alleged by the Competition Commission. AMSA also admits that it differentiated on discounts between its wire customers in the Barnes Fencing complaint but again denies that this was anticompetitive. Finally AMSA does not admit the excessive pricing complaint made against it (for which it was originally fined R692 million in 2007 although it appealed the imposition of that fine).
Considering that of the ongoing investigations settled in this consent order, 4 involved price-fixing, market division or excessive pricing, all of which attract a fine for a 1st offence of up to 10% of a firm's turnover and that the excessive pricing complaint initially attracted a fine of approximately half of the R1.5 billion agreed penalty, the settlement is a good deal for AMSA. It also saves the Commission from protected legal battles on multiple fronts and while the Commission may not have the satisfaction of a guilty finding in respect of all complaints, the R1.5 billion penalty together with the finality and certainty achieved by the settlement is also a good result for the regulator.