The Competition Tribunal has found that certain large buyers of scrap, including steel and wire products company Cape Gate, had entered into an agreement to fix the purchase price of scrap metal.

The tribunal has found that Cape Gate contravened parts of the Competition Act by participating in price-fixing in the market for the purchase of scrap metal in South Africa.

Scrap metal is a key input in the production of steel products and includes waste metal from cans, household appliances and other metal items.

“Cape Gate is extremely disappointed in the finding. The matter was argued in mid-2019 and the tribunal took more than six years to produce a decision. The tribunal failed to take any cognisance of the fact that the pricing formula in issue was the outcome of transparent negotiations between the scrap buyers and the scrap merchants. 

"It was not imposed by the scrap buyers, including Cape Gate. Both the then Department of Trade and Industry and the Competition Commission were fully aware of these negotiations and the pricing formula, which was aimed at keeping scrap within South Africa for the benefit of the country’s steel consumers. Cape Gate has always vehemently denied that this can be characterised as collusive cartel conduct. It has already filed an appeal against the decision in the Competition Appeal Court,” Cape Gate chairperson Oren Kaplan says.

The other respondents were steel producer ArcelorMittal South Africa (AMSA), stainless steel producer Columbus Stainless and steel manufacturer Scaw South Africa.

AMSA and Columbus admitted liability and concluded settlement agreements with the commission, which were later confirmed by the tribunal, while Scaw applied for corporate leniency.

The commission submitted that the firms operated as a buyers’ cartel, working together to use the same pricing formula and premium when buying scrap metal from scrap merchants.

The commission contended that collective negotiations by competitors to directly or indirectly agree on a purchase price for scrap, in contrast to individual and independent negotiations between each of them and each of the scrap merchants, is prohibited by the Act.

The buyers’ cartel conduct ended in 2008, the commission notes.

Further proceedings in relation to remedies will be determined in due course, the tribunal points out.