Competition Tribunal confirms Pailpac consent agreement:
R5 million administrative penalty and an end to exclusive supply arrangements

 
Pailpac (Pty) Ltd (“Pailpac”), a manufacturer of injection-moulded plastic pails and containers for the paints and coatings industry, has agreed to pay a R5 million administrative penalty in settlement of a case involving an alleged abuse of dominance.
 
The penalty forms part of the terms of a consent agreement which has been confirmed as an order by the Competition Tribunal (“Tribunal”). While Pailpac does not admit to contravening the Competition Act (“the Act”) as alleged by the Competition Commission (“Commission”), it agrees to the following terms, among others, as part of the consent agreement:
 
Ending exclusive supply arrangements
 
Pailpac will not to enter into any agreements with customers that designate it as the sole or exclusive supplier of injection moulded plastic containers for packaging of water-based coatings:
 
“Pailpac will not enter into agreements with customers of injection moulded plastic containers for packaging of water-based coatings that stipulate that Pailpac will be the sole or exclusive supplier, or that require that all value of the customer's purchases accrue to Pailpac ("exclusivity") in respect of part or whole of customer's requirements.”
 
Releasing customers from restrictive contractual terms
 
Pailpac will release customers currently subject to exclusivity clauses or automatic renewal provisions in their contracts form such clauses and provisions:  
 
“Pailpac will release any customers of injection moulded plastic containers for packaging of water-based coatings who have exclusivity clauses in their current supply agreements from their obligations in respect of all such exclusive clauses. Pailpac will notify these affected customers within 30 days of the Consent Order being confirmed by the Tribunal.”
 
“Pailpac will release any customers of injection moulded plastic containers for packaging of water-based coatings who have automatic renewal clauses in their existing contracts from the provisions of the automatic renewal clause, where such provisions would take effect on or after the date of the confirmation of the Consent Order.”
 
Supporting SMMEs and historically disadvantaged persons (“HDPs”)
 
Pailpac will, over the next five years, procure post-consumer plastic packaging waste material to a specified amount from SMMEs, HDPs and informal waste collectors:
 
“As part of its ongoing commitment to sustainability and supporting SMMEs, and subject only to circumstances outside of Pailpac's control, Pailpac will ensure that R[…] (including VAT) post-consumer plastic packaging waste material is procured, directly or indirectly, from SMME, Historically Disadvantaged Persons and informal waste collectors over a period of five years from the date of confirmation of the settlement agreement as a Consent Order. Subject to fluctuations in supply and demand, Pailpac will endeavour to meet certain annual procurement targets.”
 
Administrative Penalty
 
Pailpac has agreed to pay an administrative penalty of R5 million.
 
Implementing a competition law compliance programme
 
Pailpac will implement a competition law compliance programme designed to ensure that its employees, management and directors do not contravene the Act. A copy of the programme will be submitted to the Commission within 60 days.
 
Background
 
Following an investigation launched in May 2022, the Commission found that Pailpac was a dominant firm in the market for the manufacture and supply of injection moulded containers used by water-based paint and coatings manufacturers. It alleged that Pailpac engaged in exclusionary conduct envisaged in sections 8(1)(d)(i) and 8(1)(c) of the Act through its exclusive or near-exclusive agreements with major customers and by implementing below-cost pricing strategies. The Commission alleged that this gave rise to substantial anti-competitive effects in the relevant market.
 
Pailpac disagreed with these findings, including the Commission’s market definition, its potential dominance as well as the allegations of any possible contraventions of the Act. Pailpac emphasised its cooperation during the investigation and contended that its business practices, including limited exclusivity arrangements with some of its customers, had led to significant innovation and investment that would not have otherwise been possible.
 
[…] refers to an amount claimed by Pailpac as confidential information.