TRIBUNAL FINES TOURVEST APPROXIMATELY R9 MILLION FOR COLLUSIVE TENDERING
The Tribunal has found Tourvest Holdings (Pty) Ltd (“Tourvest”) and Siyazisiza Trust (“the Trust”) guilty of collusive tendering in relation to an Airports Company South Africa (“ACSA”) tender for arts, crafts and curio retail leasing opportunities at OR Tambo International Airport in Johannesburg (“OR Tambo”).
In addition to the finding that Tourvest and the Trust contravened section 4(1)(b)(iii) of the Competition Act (“the Act”), the Tribunal has ordered Tourvest to pay an administrative penalty (a fine) of R9 181 073 (nine million, one hundred and eighty one thousand, and seventy three Rand). The Tribunal has used its discretion to not impose any administrative penalty on the Trust.
The Tribunal’s non-confidential order and reasons will be available on www.comptrib.co.za in due course. Below, is a summary thereof:
THE RESPONDENTS
Tourvest conducts business in the tourism industry. Among others, it operates arts, crafts and curio retail stores and branded homeware stores in the international departures terminal section of OR Tambo.
The Trust is a broad-based craft enterprise development agency which works with multiple rural crafters. It sells the crafters’ products to retailers, government entities, corporate clients and foreigners. The Trust’s operations are financed through donor funding and revenue derived from craft sales.
BACKGROUND
In February 2013, ACSA published a request for bids for a tender in relation to arts, crafts and curio retail leasing opportunities at OR Tambo. The tender involved three separate shops i.e. three separate retail opportunities. The tender, which was to be for a period of five years, was divided into three, viz., Shop DF02 (“Opportunity 1”), DF Shop 20 (“Opportunity 2”) and Shops IPR 04, DFE 04, BS 02 (“Opportunity 3”). The conduct of Tourvest and the Trust relates to their bids for Opportunity 3.
Tourvest assisted the Trust to prepare its bid for Opportunity 3 and they concluded a Memorandum of Understanding (“MOU”) in this regard. During the bid evaluations, ACSA noticed similarities in Tourvest and the Trust’s bids, for example, the bids included the same projections in pricing, suggesting possible collusive conduct between the two. Tourvest, however, argued that there had been full disclosure of the arrangement between it and the Trust. The Commission, however, disputed this and said that there was significant under-disclosure by the parties to ACSA.
In April 2014, the Commission received a complaint of collusion from ACSA. Based on its subsequent investigation, the Commission concluded that Tourvest and the Trust had colluded when bidding for the tender, in contravention of section 4(1)(b) (iii) of the Act (i.e. collusive tendering).
ARGUMENTS
The Commission’s case was that during the period when Tourvest and the Trust both submitted bids for Opportunity 3 at ACSA, they became actual or potential parties in a horizontal relationship i.e. they became competitors.
Both Tourvest and the Trust denied the Commission’s allegations, arguing that they were not competitors. Tourvest said it had assisted the Trust to prepare its bid as it had no experience in bidding for such tenders. The Trust did not have the expertise to run the business and would be assisted in the management of the business by Tourvest, through a MOU, until they were able to do so themselves, in the event of the Trust’s bid being successful. However, Tourvest also competed for the same tender for Opportunity 3 in its own right.
ORDER AND REASONS
In its order and reasons, the Tribunal notes that, in considering the factual evidence, it must determine the following: (i) whether the parties are in a horizontal relationship i.e. whether they are in a relationship as competitors, and if so (ii) whether the case involves collusive tendering within the meaning of section 4(1)(b)(iii) of the Act.
What is relevant to the Tribunal’s purposes is the respondents’ conduct in relation to the ACSA tender for Opportunity 3. It was common cause that Tourvest assisted the Trust with its bid for Opportunity 3, that their two bids contained significant similarities and that they concluded an MOU.
The Tribunal notes: “… the respondents’ argument that because the Trust could not have fulfilled the requirements of the tender by itself absent the agreement with Tourvest (as a service provider) – even though it had submitted its own bid – does not find support in competition jurisprudence. The ability of a party to a collusive agreement to ultimately perform is not relevant when deciding whether or not there was an agreement to collude…
… we find that at the point the bid was submitted, the Trust was in fact holding itself out as a competitor of Tourvest and the other bidders. We, therefore, conclude that Tourvest and the Trust were in a horizontal relationship…”.
The Tribunal notes that the parties agreed that the financial details provided by the Trust in its bid would be identical to the information which Tourvest would provide. The financial details form the basis of the bid rigging and collusive tendering allegations against the respondents.
The Tribunal has found that: “The scheme of the arrangement designed by Tourvest properly characterized was an arrangement to subvert competition in contravention of the Act. Sight must not be lost of the fact that Tourvest submitted its own independent bid for ACSA’s Opportunity 3, whilst reaching agreement with the Trust about its bid for the same opportunity.”
The Tribunal concluded that the conduct of Tourvest and the Trust, and the agreement (MOU) concluded by them, read with Tourvest’s own independent bid:
1. was an agreement between parties in a horizontal relationship;
2. was entered into to subvert competition; and
3. contravenes section 4(1)(b) (iii) of the Act.
REMEDIES
The Tribunal considered various factors when determining the appropriate penalty amount “in relation to the instigator of the collusive conduct, Tourvest”. These are discussed in detail in the Tribunal’s reasons. The Tribunal reduced the administrative penalty payable by Tourvest significantly since the respondents expressly disclosed, to an extent, certain details of the relationship between them in their bidding documents to ACSA.
In relation to the Trust, the Tribunal (using its discretion) has decided not to impose any penalty on the Trust for its involvement in the collusive conduct “given its size and purpose, the fact that it did not benefit from the conduct, as well as its role in the conduct. On the factual evidence before us Tourvest clearly was the mastermind behind and leader in the collusive tendering. It drew the Trust into the collusive conduct for its own intended financial benefit…”
Issued by:
Gillian de Gouveia, Communications Officer
On behalf of the Competition Tribunal of South Africa
Cell: +27 (0) 82 410 1195
E-Mail: GillianD@comptrib.co.za
Twitter: @comptrib
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