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October 08, 2008


SA gold miners call for imposition of fine in pricing dispute

It is reported that South African gold miners Harmony and DRDGold have requested the South African Competition Tribunal to impose a fine of ZAR 1.48 billion the equivalent of 8% on ArcelorMittal Steel South Africa’s ZAR 18.5 billion turnover, after having ruled earlier this year that it was guilty of charging excessive prices on the flat steel it sold to domestic customers.

Advocate for the gold miners, Mr David Unterhalter argued that excessive pricing was the most egregious abuse of dominance and that a high administrative penalty was, thus, appropriate. He also suggested too that the relevant figure against which the fine should be levied was the full turnover figure for the year and not the ZAR 7.2 billion turnover arising from its domestic steel sales during the period in question.

However, Mittal Steel SA’s senior counsel, Mr Chris Loxton raised questions not only to the quantum of the penalty requested, but also the competence and appropriateness of the imposition of a penalty in a case where a precedent was being set with regards what, in the view of the competition authorities, was in fact an excessive price. He also noted that the tribunal had various other remedies that it could impose to deal with what it perceived as anticompetitive behavior, but that a fine, in the context of the complexities that surround excessive pricing, would make the imposition of a penalty problematic as it implied fault better associated with a criminal charge. He countered that it had, in fact, changed its pricing practices from IPP and was now deploying a basket model that benchmarked its domestic prices with domestic prices in a range of other countries.

The South African Competition Tribunal ruled on March 27th 2007 that pricing policies employed by ArcelorMittal’s Mittal Steel SA to be in contravention of South Africa’s Competition Act. But it reconvened hearings to deliberate on the appropriateness of imposing an administrative penalty given that it was South Africa’s first ever excessive pricing case. The Act itself gives the authority the power to impose a maximum penalty of 10% on turnover for the financial year prior to which the complaint was lodged.