Blanket manufacturer fined R5 million, reseller fined R500 thousand
after Tribunal finds both firms guilty of collusion in government tender
Blanket manufacturer and supplier, Aranda Textile Mills (Pty) Ltd (“Aranda”), and blanket reseller, Mzansi Blanket Supplies (Pty) Ltd (“Mzansi”) have been found guilty of price fixing and collusive tendering in relation to a 2015 National Treasury tender.
The tender, for which both Aranda and Mzansi had submitted bids, provided for the procuring of blankets, among other items, on behalf of multiple state departments including the Department of Correctional Services, South African Police Service, South African Military Health Service and Emergency Medical Services.
After considering all the evidence and submissions, the Tribunal concluded that Aranda and Mzansi contravened section 4(1)(b)(i) and (iii) of the Competition Act (“the Act”) i.e., price fixing and collusive tendering. In its order and reasons for its decision, the Tribunal notes:
“… the only reasonable inference that can be drawn is that Aranda and Mzansi had engaged in collusive bidding. They adopted a pricing strategy through which they could hedge their bets and ensure that only either or both won the tender, and not the other bidders. For this strategy to be successful, which it was in the 2015 Tender, both Aranda and Mzansi would need to be active participants in coordinating their bids…”
The Tribunal has ordered that Aranda must pay an administrative penalty of R5 000 000 (five million Rand) and Mzansi must pay an administrative penalty of R500 000 (five hundred thousand Rand) respectively.
In determining an appropriate penalty, the Tribunal considered both mitigating and aggravating factors i.e.:
- The Commission’s case was limited to the conduct of the respondents in respect of the one tender;
- Neither of the respondents have been found to have contravened the Act previously; and
- Aranda, while having a long and proud history of manufacturing, also demonstrated that it was committed to promoting local production. However, it elected to engage in unfair pricing methods towards potential bidders thus defeating one of the objectives of the tender namely the promotion of small, black-owned businesses.
Evaluation of evidence
A full copy of the Tribunal’s order and the reasons for its decision will be made available on the Tribunal’s website in due course at www.comptrib.co.za
. Below, are a few excerpts and a summary:
Both Aranda and Mzansi submitted bids for the tender. The two had a close commercial relationship through an ongoing supply relationship as evidenced by manufacturing and business agreements.
Aranda, being a manufacturer of blankets, was a supplier to Mzansi and the other bidders for the tender. However, the prices Aranda quoted other bidders were significantly higher in comparison to the quote offered to Mzansi - and the financial terms extended to Mzansi were more favourable than those afforded to the other bidders. Therefore, other interested bidders’ input price for the blankets (cost price) was significantly higher than Mzansi’s.
The Tribunal finds that this was “a strategy to ensure that only Aranda (evaluated on the basis of pricing) stood to win the tender or Mzansi (evaluated on the basis of pricing and B-BBEE points) won the tender and not any other bidder…
When we stand back from the evidence and consider it in its totality, the only reasonable inference that can be drawn in relation to the 2015 Tender is that the respondents co-ordinated their bids…”
The Tribunal concludes that the firms manipulated the competitive process: “we find that the evidence when considered in its totality supports the conclusion that Aranda and Mzansi, as competitors for the 2015 Tender co-ordinated their bids with each other…”
“…They co-operated with each other to ensure that if Aranda was unsuccessful Mzansi would win the tender
The Commission launched an investigation into Aranda and Mzansi in 2016, based on information obtained from the National Treasury relating to Aranda and Mzansi’s possible collusion in respect of the 2015 tender.
The Commission’s investigation found that Aranda and Mzansi discussed and agreed how to bid for the tender. In terms of this agreement Aranda would provide Mzansi with its tender documents including the pricing schedule which Mzansi would use to prepare its own tender including pricing. Both Aranda and Mzansi denied that they had contravened the Act.